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THE  LIBRARY 

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IIEGLLATORY  FEATURES  OF  SHIPPING  BILL 

HEARINGS 

BEFORE 

THE  COMMITTEE  ON  THE 
MERCHANT  MARINE  AND  FISHERIES 

HOUSE  OF  REPRESENTATIVES 

SIXTY-FOURTH  CONGRESS 
First  Session 

ON 

H.  R.  14337 

TO  REGULATE  CARRIERS  BY  WATER  ENGAGED  IN  THE 

FOREIGN  AND  INTERSTATE  COMMERCE 

OF  THE  UNITED  STATES 


APRIL  13  TO  22,  1916 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1916 


COMMITTEE  ON  THE  MERCHANT  MARINE  AND  FISHERIES. 
House  op  Representatives. 


JOSHUA  W.  ALE 
RUFUS  HARDY,  Texas. 
MICHAEL  E.  BURKE,  Wisconsin. 
EDWARD  W.  SAUNDERS,  Virginia. 
PETER  J.  DOOLING,  New  York. 
HENRY  BRUCKNER,  New  York. 
LADISLAS  LAZARO,  Louisiana. 
WILLIAM  S.  GOODWIN,  Arkansas. 
JAMES  F.  BYRNES,  South  Carolina. 
JESSE  D.  PRICE,  Maryland. 
CARL  C.  VAN  DYKE,  Minnesota. 


XANDER,  Missouri,  Chair  wan. 

OSCAR  L.  GRAY,  Alabama. 

DAVID  H.  KINCHELOE,  Kentucky. 

WILLIAM  S.  GREENE,  Massachusetts. 

ASIIER  C.  HINDS,  Maine. 

CHARLES  F.  CURRY,  California. 

GEORGE  W.  EDMONDS,  Pennsylvania. 

WILLIAM  A.  RODENBERG,  Illinois. 

GEORGE  A.  LOUD,  Michigan. 

LINDLEY  H.  HADLEY,  Washington. 

FREDERICK  W.  ROWE,  New  York. 
C.  Bay,  Clerk. 


LIST  OF  WITNESSES. 


Bush,  Mr.  Irving  T..  prosident  of  the  Bush  Terminal  Co.,  New  York Gl 

Dearborn,  Mr.  George  S.,  president  American-Hawaiian  Steamship  Co.,  New 

York 91 

Franklin,  Mr.  Philip  A.  S.,  receiver  of  the  International  Mercantile  Marine  Co., 

New  York 116 

Gregson,  J^Ir.  Fred  P.,  traffic  manager  of  Associated  Jobbers  of  Los  Angeles, 

Cal ;■-■;■-       182 

Johnson,  Dr.  Emory  R..  professor  of  transportation  and  commerce.  University 

of  Pennsylvania.  Philadelphia,  Pa 10 

Jacobs,  Mr.  Isidor,  president  of  the  California  Canneries  Co.,  San  Francisco,  Cal .        45 

Kirlin,  Mr.  J.  Parker,  attorney  at  law.  New  York 128 

Mann,   Mr.    Seth,   representing   San   Francisco   Chamber  of  Commerce,    San 

Francisco.  Cal 158 

Rhett,  Mr.  R.  G.,  president  of  the  Chamber  of  Commerce  of  the  United  States, 

Charleston,  S.  C '.       148 

Sherman,  Mr.  Lawrence  K.,  vice  president  of  W.  R.  Grace  &  Co.,  New  York. . .  77 
Wettrick,  Mr.  S.  J.,  attorney  at  law,  Seattle,  Wash 186 


EXHIBITS. 


r^  Page. 

.  Ia  Text  of  H.  R.  14337 5 

^s^  Telegram  from  the  chairman  of  the  merchant  marine  committee  of  the  Boston 

<Jq\    Chamber  of  Commerce 41 

N.     Report  of  the  special  committee  on  merchant  marine  of  the  Boston  Chamber  of 

\9^    Commerce 42 

Letter  from  the  secretary  of  the  Philadelphia  Board  of  Trade 44 

Amendments  suggested  by  the  committee  of  the  Chamber  of  Commerce  of  New 

{         York 74 

Letter  from  Mr.  Duncan  N.  Hood,  South  American  representative  of  Hill 

■  Publishing  Co. ,  New  York '. 156 

Letter  from  Mr.  B.Muir,  vice  president  of  W.  R.  Grace  &  Co.,  New  York 157 

Legal  status  of  a  tramp  steamer 194 

Clipping  from  the  New  York  Journal  of  Commerce  of  Mar.  17, 1916 195 

Statement  submitted  by  Mr.  E.  C.  Plummer,  Bath,  Me 196 

3 


G79934 


REGULATORY  FEATURES  OF  SHIPPING  BILL. 


Committee  on  the  Merchant  Marine  and  Fisheries, 

House  of  Representatives, 
Washington,  D.  C,  Thursday,  April  13,  191 4. 

The  committee  mot  at  10.30  o'clock  a.  m.,  Hon.  Joshua  W.  Alexan- 
der (chahman)  presiding. 

The  Chairman.  Gentlemen,  we  have  set  down  for  hearing  this 
morning  H.  R.  14337,  a  bill  to  regulate  carriers  by  water  engaged  in 
the  foreign  and  interstate  commerce  of  the  United  States,  with  a  view 
of  substituting  its  provisions  for  sections  9  and  10  of  bill  10500.  The 
bill  is  as  follows : 

Be  it  enacted  bij  the  Senate  and  House  of  Representatives  of  the  United  States  of  America 
in  Congress  assembled,  That  the  term  "  common  carrier  by  water, "  when  used  in  this 
act,  means  a  common  carrier  engaged  in  the  transportation  by  water  of  passengers  or 
property  in  the  interstate  or  foreign  commerce  of  the  United  States. 

Tlie  term  ''common  carrier  by  water"  when  limited  by  the  term  ''iji  foreign  com- 
merce "  means  such  a  common  carrier  engaged  in  the  transportation  by  water  of  passen- 
gers or  property  between  the  United  States  or  any  of  its  Districts,  Territories,  or  pos- 
sessions and  a  foreign  country,  and  includes  both  tlie  import  and  export  trade. 

The  term  "common  carrier  by  water"  when  limited  by  the  term  ''in  interstate 
commerce"  means  such  a  common  carrier  engaged  in  the  transportation  by  water  of 
passengers  or  property  between  one  State,  Territory,  District,  or  possession  of  the 
United  States  and  any  other  State,  Territory,  District,  or  possession  of  the  United 
States,  or  between  one  place  in  a  Territory,  District,  or  possession  and  another  place 
in  the  same  Territory,  District,  or  possession. 

The  term  "'other  person  subject  to  this  act"  means  any  person  not  included  in  the 
term  "common  carrier  by  water"  and  carrying  on  the  business  of  forAvarding,  ferrying, 
toAving,  or  furnisliing  transfer,  lighterage,  dock,  warehouse,  or  other  terminal  facilities 
in  or  in  connection  with  the  foreign  or  interstate  commerce  of  the  United  States. 

The  term  "person"  wherever  used  in  this  act  includes  corporations  and  associations 
existing  under  or  authorized  by  the  laws  of  the  United  States,  or  any  State,  Territory, 
District,  or  possession  thereof,  or  of  any  foreign  country.  , 

Sec.  2.  That  no  common  carrier  by  water  in  foreign  commerce  or  in  interstate  com- 
merce shall — 

First.  Pay  or  allow  or  enter  into  any  coihbination,  agreement,  or  understanding, 
expressed  or  implied,  to  pay  or  allow  a  deferred  rebate  to  any  shipper.  The  term 
"deferred  rebate,"  as  used  in  this  act,  means  a  return  of  any  portion  of  the  freight 
money  allowed  by  a  carrier  to  any  shipper  as  a  consideration  for  the  giving  of  all  or  any 
portion  of  his  shipments  to  such  carrier,  or  for  any  other  purpose,  the  payment  of  which 
is  deferred  beyond  the  period  for  wliich  it  is  computed  and  is  made  only  if,  during 
both  the  period  for  wliich  the  return  is  computed  and  the  period  of  deferment,  the 
shipper  has  given  his  slupments  to  such  carrier  in  accordance  with  the  terms  of  the  re- 
bate agreement  or  arrangement. 

Second.  Use,  either  separately  or  in  conjunction  with  any  other  carrier  through 
agreement  or  othermse,  fighting  ships  for  the  purpose  of  excluding,  preventing,  or 
reducing  competition.  The  term  "fighting  ship"  as  used  in  tliis  act  means  a  vessel 
selected  for  and  employed  in  a  particular'trade  by  a  carrier  or  group  of  carriers  for 
the  sole  purpose  of  driving  another  carrier  out  of  said  trade.  The  United  States 
shipping  board  (hereinafter  known  as  the  board),  after  full  hearing  upon  a  complaint 
made,  or  after  full  hearing  under  an  order  for  an  investigation  and  hearing  made  by 
the  board  on  its  own  initiative,  shall  determine  questions  of  fact  as  to  whether  said 
carrier  or  carriers  did  select  or  employ  a  vessel  as  a  fighting  ship. 

Third.  Retaliate  against  any  shipper  by  refusing,  or  threatening  to  refuse,  space 
accommodations  when  such  are  availal)le.  or  resort  to  other  discriminating  or  unfair 


6  REGULATOEY    FEATURES    OF    SHIPPING    BILL. 

methods,  because  such  shipper  has  patronized  any  other  carrier  or  has  filed  a  com- 
plaint charging  unfair. treatment  or  for  any  other  reason. 

Any  carrier  who  violates  any  provision  of  this  section  shall  be  guilty  of  a  misde- 
meanor, punishable  by  a  fine  of  not  more  than  §25, 000  for  each  offense.  If  it  shall  be 
determined  by  the  board  or  adjudged  by  any  coiu't  of  competent  jmisdiction  that  any 
vessel,  whether  of  the  United  States  or  of  any  foreign  country,  is  being  operated  in 
violation  of  any  provision  of  this  section,  the  board  or  the  court  may,  by  its  order, 
judgment,  or  decree,  jirohibit  said  vessel  from  entering  at  or  clearing  from  any  port 
of  the  United  States  in  \dolation  of  such  order,  judgment,  or  decree  made  or  rendered, 
until  the  board  or  court  shall  find  that  the  violation  of  this  section  has  ceased.  A 
penalty  of  $25,000  shall  be  imposed  upon  any  vessel  which  shall  enter  or  clear  from 
any  port  of  the  United  States  in  \'iolation  of  the  provisions  of  a  judgment  or  decree 
rendered  as  provided  in  tliis  section  for  each  and  every  such  entry  or  clearance,  which 
penalty  or  penalties  may  be  recovered  by  proceedings  in  admiralty  in  the  district 
court  of  the  United  States  for  the  district  in  which  said  vessel  may  be,  and  the  coiut 
may  direct  the  sale  of  said  vessel  for  the  purpose  of  realizing  the  amount  of  said  pen- 
alty or  penalties  and  cost. 

Sec.  3.  That  every  common  carrier  by  water  in  foreign  commerce  or  in  interstate 
commerce,  or  other  person  subject  to  this  act,  shall  file  for  approval  with  the  board 
a  true  copy,  or,  if  oral,  a  true  and  complete  memorandum,  of  every  agreement,  under- 
standing, conference,  or  other  arrangement,  to  which  it  may  be  a  party,  to  to  which 
i1  may  conform  in  whole  or  in  part,  fixing  or  regulating  transportation  rates  or  fares; 
giving  or  receiving  special  rates,  accommodations,  or  other  special  privileges  or  advan- 
tages; controlling,  regulating,  preventing,  or  destrojdng  competition;  pooling  or 
apportioning  earnings,  losses,  oi'  traffic;  allotting  the  ports  or  restricting  or  otherwise 
regulating  the  number  and  character  of  sailings  between  ports;  limiting  or  regulating 
in  any  way  the  volume  or  character  of  freight  or  passenger  traffic  to  be  carried ;  or  in 
any  manner  providing  for  an  exclusive,  preferential,  or  cooperative  working  arrange- 
ment. All  modifications  and  cancellations  of  such  agreements,  understandings, 
conferences,  or  arrangements  shall  be  immediately  filed  with  the  board  and  shall 
not  be  effecti\-e  imless  approved  by  the  board. 

The  board  is  hereby  empowered  to  order  canceled  or  modified  any  such  agree- 
ment. unders,tanding.  conference,  or  arrangement,  or  any  part  thereof,  that  it  may 
find  discriminating  or  unfair  as  between  carriers,  shippers,  exporters,  importers, 
or  ports,  or  between  exporters  from  the  United  States  and  their  foreign  competitors, 
or  that  it  may  find  to  operate  to  the  detriment  of  the  commerce  of  the  United  States 
or-that  may  be  in  violation  of  this  Act. 

All  such  agreements,  understandings,  conferences,  and  arrangements  shall  be 
approved  or  disapproved  by  the  board,  and  when  approved  shall  be  excepted  from 
the  provisions  of  the  Act  of  Congress  approved  July  2.  1890,  entitled  '"An  act  to  protect 
trade  and  commerce  against  unlawful  restraints  and  monopolies,"  and  amendments 
and  acts  supplementary  thereto,  and  the  provisions  of  sections  73  to  77,  both  inclu- 
sive, of  an  act  approved  August  27,  1894,  entitled  "An  act  to  reduce  taxation,  to 
provide  revenue  for  the  Government,  and  for  other  purposes,"  and  amendments 
and  acts  supplementary  thereto. 

Any  carrier  by  water,  or  other  person  subject  to  this  act,  who  fails  to  file  with  the 
board,  within  a  reasonable  time  to  be  prescribed  by  the  board,  a  true  and  complete 
copy  or  memorandum  of  eveiy  agreement,  imderstanding,  conference,  or  arrange- 
ment, as  required  in  this  section,  shall  be  liable  for  each  such  offen,se  to  a  pcTialty 
of  $1,000  for  each  day  during  which  such  offense  continues.  Said  penalty  shall 
accrue  to  and  be  recovered  by  the  United  States  in  a  civil  action. 

Sec.  4.  That  it  shall  be  unlawful  for  any  common  carrier  by  water,  or  other  person 
subject  to  this  act,  either  directly  or  indirectly — 

First.  To  charge,  demand,  collect,  or  receive  from  any  person  or  jiersons  by  any 
special  rate,  rebate,  drawback,  or  other  device  a  greater  or  less  compensation  for  any 
service  rendered  or  to  be  rendered  in  the  transportation  of  passengers  or  property 
subject  to  the  provisions  of  this  act  than  it  charges,  demands,  collects,  or  receives 
from  any  other  person  or  persons  for  doing  for  him  or  them  a  like  service  in  the  trans- 
portation of  a  like  kind  of  traflic  under  substantially  similar  circumstances  and  con- 
ditions: J'roridrd,  That  nothing  in  this  act  shall  prevent  the  carriage,  storage,  or 
handling  of  property  free  or  at  reduced  rates  for  the  I'nited  States.  State,  or  municipal 
governments,  or  for  charitable  purposes,  or  to  or  from  fairs  and  expositions  for  exhibi- 
tion thereat,  or  the  giving  of  reduced  rates  to  ministers  of  religion,  or  to  municipal 
governments  for  the  transportation  of  indigent  persons,  or  to  inmates  of  the  National 
omes  or  State  homes  for  disabled  volunteer  soldiers,  and  of  soldiers'  and  sailors' 
homes,  including  those  about  to  enter  and  those  returning  home  after  discharge, 
under  arrangements  with  the  board  of  managers  of  said  homes. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  7 

Second.  'I'o  make  or  t,nvo  any  undue  or  unreasonable  preference  or  advantage  to 
any  j)articular  person,  locality,  or  description  of  traffic  in  any  respect  whatsoever  or 
to  subject,  any  particular  person,  locality,  or  description  of  traffic  to  any  undue  or 
unreasonaI)le  prejudice  or  disadvantage  in  any  respect  whatsoever. 

Third.  To  allow  any  person  or  persons  to  obtain  transportation  for  property  at  less 
than  the  regular  rates  then  established  and  enforced  on  the  line  of  transportation  of 
such  carrier,  by  means  of  false  billing,  false  classification,  false  weighing,  false  report 
of  weight,  or  by  any  other  device  or  means. 

Fourth.  To  induce,  persuade,  or  otherwise  influence  any  marine  insurance  com- 
pany or  underwriter,  or  agent  thereof,  to  prevent  a  competing  carrier  by  water  from 
s'>curing  a.s  favoralile  a  rate  of  insurance  on  cargo  carried,  having  due  regard  to  the 
class  of  vessel,  as  is  granted  to  such  carrier  or  person. 

Any  common  carrier  by  water,  or  other  person  subject  to  this  act,  or,  whenever 
such  carrier  or  person  is  a  corporation,  any  director  or  officer  thereof,  or  any  receiver, 
trustee,  lessee,  agent,  or  person  acting  for  or  employed  by  such  corporation  who, 
alone  or  with  any  other  person  or  party,  shall  knowingly  and  willfully  do  or  cause  to 
be  done,  or  shall  willingly  suffer  or  permit  to  be  done,  any  act,  matter,  or  thing  in 
this  section  prohi])iled  and  hereby  declared  to  be  unlawful,  or  who  shall  aid  or  abet 
therein,  shall  be  deemed  guilty  of  a  misdemeanor,  and  shall,  upon  conviction,  be 
subject  to  a  fine  of  not  to  exceed  $5,000  for  each  offense:  Providrd,  That  if  the  offense 
for  which  any  person  shall  be  con\dcted  as  aforesaid  shall  be  an  unlawful  discrimina- 
tion in  rates,  fares,  or  charges  for  the  transportation  of  passengers  or  propertj%  such 
person  shall,  in  addition  to  the  fine  hereinbefore  provided  for,  be  liable  to  imprison- 
ment in  the  penitentiary  for  a  term  of  not  exceeding  two  years,  or  both  such  fine 
and  imprisonment,  in  the  discretion  of  the  court. 

Sec.  5.  That  whenever,  after  full  hearing  upon  a  complaint,  or  under  an  order  for 
investigation  made  by  the  board  on  its  own  initiative,  the  board  shall  be  of  opinion 
that  any  rates  or  charges  demanded,  charged,  or  collected  by  any  common  carrier 
by  water  in  foreign  commerce  are  unreasonably  high,  or  unjustly  discriminatory 
between  shippers  or  ports,  or  unjustly  prejudicial  to  exporters  of  the  United  States 
as  compared  ^\dth  their  foreign  competitors,  or  represent  an  unjust  relation  between 
classes  of  commodities,  the  board  is  hereby  empowered  to  determine  and  prescribe 
what  shall  be  the  just  and  reasonable  rates  and  charges  to  be  thereafter  observed  as 
the  maximum  to  be  charged,  and  to  make  an  order  that  such  carrier  shall  cease  and 
desist  from  publishing,  demanding,  or  collecting  any  rate  or  charge  in  excess  of  the 
prescribed  maximum,  such  order  to  continue  in  force  for  such  period  of  time,  not 
exceeding  two  years,  as  shall  be  prescribed  in  the  order  of  the  board,  unless  the  same 
shall  be  suspended,  modified,  or  set  aside  by  the  board,  or  be  suspended  or  set  aside 
by  a  court  of  competent  jurisdiction.  The  board  is  hereby  also  empowered  upon 
formal  complaint,  or  in  proceedings  instituted  of  its  own  motion  and  after  full  hearing, 
or  detennine,  prescribe,  and  order  enforced  just  and  reasonable  regulations  and 
practices  relating  to  or  connected  wdth  the  receiving,  handling,  storing,  and  delivering 
of  property  by  any  such  carrier. 

Sec.  fi.  That  every  common  carrier  by  water  in  interstate  commerce  shall  establish 
observe,  and  enforce  in  interstate  commerce  just  and  reasonable  rates,  fares,  and 
charges  and  just  and  reasonable  regulations  and  practices  affecting  cla.ssifications, 
ra,t(>s,  or  tarilVs,  the  issuance,  form,  and  substance  of  tickets,  receipts,  and  bills  of 
lading,  the  manner  and  method  of  presenting  marking,  packing,  and  delivering 
jjrojierty  for  transportation,  the  carrying  of  personal,  sample,  and  excess  baggage 
the  faciUties  for  transportation,  and  all  other  matters  relating  to  or  connected  with 
the  receiving,  handling,  transporting,  storing,  and  delivering  of  property.  WTieneyer 
the  board  shall,  upon  formal  complaint  or  in  proceedings  instituted  of  its  own  motion 
and  after  full  hearing,  be  t)f  opinion  that  any  of  the  aforementioned  rates,  charges, 
classifications,  regulations,  or  practices  are  unjust  or  unreasonable,  the  board  is 
hereby  empowered  to  determine,  prescribe,  and  orrler  enforced  just  and  reasonable 
rates,  charges,  classifications,  regulations,  and  practices. 

Every  common  carrier  by  water  in  interstate  commerce  shall  file  with  the  board  and 
keep  open  to  i)ublic  inspection,  in  the  form  and  within  the  time  prescribed  by  the 
board,  all  the  rates,  fares,  and  charges  for  transportation  between  different  points  on 
its  own  route  and  points  on  the  route  of  an 3^  other  carrier  by  water  when  a  through 
route  and  joint  rate  have  been  established,  and  if  no  joint  rate  over  the  through  route 
has  been  established  the  several  carriers  in  such  through  route  shall  file  the  separately 
estaljlished  rates,  fares,  and  charges  applied  to  the  tln-ough  transportation.  No  in- 
crease shall  be  made  liy  such  carrier  in  the  rates,  fares,  and  charges,  or  joint  rates,  fares, 
and  charges  which  have  been  filed  in  compliance  wdth  the  requirements  of  this  sec- 
tion, except  after  10  days'  notice  to  the  board,  which  notice  shall  plainly  state  the 
increase  proposed  to  be  made.     The  board  is  hereby  empowered  to  determine  and 


8  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

prescribe  what  shall  be  the  maximum  rates,  fares,  and  charges  to  be  observed  and 
charged  by  such  carrier,  and  to  make  an  order  that  such  carrier  shall  cease  and  desist 
from  demanding  or  collecting  any  rate,  fare,  or  charge  in  excess  of  the  piescribed 
maximum,  such  order  to  continue  in  force  for  such  period  of  time,  not  exceeding  two 
years,  as  shall  be  prescribed  in  the  order  of  the  board,  unless  the  same  shall  be  sus- 
pended, modified,  or  set  aside  by  the  board,  or  by  a  court  of  competent  jurisdiction. 

Sec.  7.  That  whenever  a  common  carrier  by  water  in  interstate  commerce  reduces 
its  rates  on  the  carriage  of  any  species  of  freight  to  or  from  competitive  points  below  a 
fair  and  remunerative  basis  with  the  intent  of  driving  out  or  otherwise  injuring  a 
competitive  carrier  by  water,  it  shall  not  be  permitted  to  increase  such  rates  unless  after 
hearing  by  the  board  it  shall  be  found  that  such  proposed  increase  rests  upon  changed 
conditions  other  than  the  elimination  of  said  competition.  Jurisdiction  is  herel)y 
conferred  upon  the  board  after  full  hearing  upon  a  complaint  made,  or  after  full  hear- 
ing under  an  order  for  investigation  and  hearing  made  by  the  board  on  its  own  initia- 
tive, to  determine  questions  of  fact  as  to  whether  said  carrier  did  reduce  rates  below 
a  fair  and  remunerative  basis  with  the  intent  of  driving  out  or  otherwise  injiu-ing  said 
competitor. 

Sec.  8.  That  it  shall  be  unlawful  for  any  common  carrier  by  water,  or  other  person 
subject  to  tliis  act,  or  any  officer,  agent,  or  employee  of  such  carrier  or  person,  or  for 
any  other  person  lawfully  autlwrized  by  such  carrier  or  person  to  receive  informati(jn 
therefrom,  knowingly  to  disclose  to  or  permit  to  be  acquired  by  any  person  other  than 
the  shipper  or  consignee,  without  the  consent  of  such  shipper  or  consignee,  any  infor- 
mation concerning  the  nature,  kind,  quantity,  destination,  consignee,  or  routing  of 
any  property  tendered  or  deli\  ered  to  such  common  carrier  for  interstate  transporta- 
tion, or  for  transportation  between  the  United  States  and  a  foreign  country,  which  in- 
formation may  be  used  to  the  detriment  or  prejudice  of  such  shipper  or  consignee,  or 
which  may  improperly  disclose  his  business  transactions  to  a  competitor,  or  which 
may  be  used  to  the  detriment  or  prejudice  of  any  carrier;  and  it  shall  also  be  unlawful 
for  any  person  to  solicit  or  knowingly  receive  any  such  information  which  may  be  so 
used :  Provided,  That  notliing  in  this  act  shall  be  construed  to  prevent  the  giving  of 
such  information  in  response  to  any  legal  process  issued  under  the  authority  of  any 
court  of  a  State  or  of  the  United  States,  or  to  any  oflicer  or  agent  of  the  (Tovernment 
of  the  United  States,  or  of  any  State  or  Territory,  in  the  exercise  of  his  powers,  or  to 
any  oflicer  or  other  duly  authorized  person  seeking  such  information  for  the  prosecu- 
tion of  persons  charged  with  or  suspected  of  crime,  or  information  given  by  a  common 
carrier  to  another  carrier,  or  its  duly  authorized  agent,  for  the  purpose  of  adjusting 
mutual  traffic  accounts  in  the  ordinary  course  of  business  of  such  carriers. 

Sec.  9.  That  the  board  is  hereby  empowered  to  investigate  fully  all  complaints  (or 
to  undertake  investigation  on  its  own  initiative)  against  any  common  car-rier  by  water, 
charging  unfair  treatment  of  sliippers  in  the  matter  of  cargo  space  accommodations 
or  other  facilities,  having  due  regard  for  the  proper  loading  of  the  vessel  and  the 
available  tonnage,  or  unfair  or  discriminating  contra<ts  with  shippers  based  on  the 
volume  of  freight  offered,  or  unfair  treatment  in  the  loatling  and  landing  of  freight  in 
proper  condition,  or  unfair  treatment  in  the  adjustment  and  sett  lenient  of  claims. 
The  board  is  hereby  empowered  to  order  the  discontinuance  of  all  unfair  or  discrim- 
inating practices  which  it  may  find  to  exist,  and  to  adopt  all  rules  and  regulations 
which  it  may  deem  necessary  to  prevent  such  unfair  or  discriminating  practices,  and 
to  protect  the  complainant  against  any  form  of  retaliation. 

Sec.  10.  That  for  the  purpose  of  enabling  it  the  better  to  carry  out  the  j)urposes  of 
this  act,  the  board  is  hereby  empowered,  in  its  discretion,  to  re(|uire  any  (common 
carrier  by  water  in  foreign  commerce  (and  if  such  common  carrier  is  a  corporation, 
any  director  or  officer  thereof,  or  any  receiver,  trustee,  lessee,  agent,  or  person  acting 
for  or  employed  by  such  corporation)  to  file  with  it  any  ix'riodical  or  s])ecial  report, 
or  any  account,  record,  rate,  or  charge,  or  any  memorandum  of  any  fads  and  trans- 
actions appertaining  to  the  carrier's  business,  conc(>rning  any  mailer  about  which  the 
board  is  authorized  or  required  by  this  act  to  in(piire  or  keep  itself  informed  or  which 
it  is  required  to  enforce,  or  to  require  from  any  such  carrier  specific  answers  to  all 
questions  upon  which  the  board  may  need  information  in  carrying  out  this  a(;t.  Any 
such  reports,  accounts,  records,  rates,  charges,  and  nunnoranda,  or  answers  to  <}ues- 
tions,  shall  l>e  under  oath  whenever  the  board  so  rccpiires,  and  shall  be  furnished  in 
the  form  and  within  the  lime  prescribed  by  the  board,  if  any  carrier  referred  to  in 
this  section  (and  if  such  carrier  is  a  corporation,  any  director  or  ofiicer  thereof,  or  any 
receiver,  trustee,  lessee,  agent,  or  person  acting  for  or  employed  by  such  corporation) 
shall  fail  to  file  any  report,  account,  record,  rate,  charge,  or  memorandum,  or  shall 
fail  to  make  specific  arswer  to  any  question  authorized  by  this  section,  within  such 
reasonable  time  as  the  board  may  prescribe,  such  <'amer  shall  forfeit  to  the  United 
States  the  sum  of  .'SlOO  for  each  and  everv  dav  it  shall  contiiuic  to  he  h\  default  with 


RROULATOKV    FEATURKS    OF    SHIPrJNCi    IMLL.  9 

respect  thereto.  Any  person  (or  where  the  carrier  by  water  it*  a  corporation,  ai'y 
director  or  officer  thereof,  or  any  receiver,  trut^tee,  lessee,  agent,  or  person  acting  for 
or  em))loye(l  l)y  such  corporation)  who  shall  willfully  falsify  in  any  manner  whatso- 
ever,.or  who  shall  willfully  destroy,  mutilate,  or  alter,  or  who  shall  willfully  neglect 
or  fail  truthfully  to  tile  any  such  report,  account,  record,  rate,  charge,  memorandum, 
or  answer,  shall  he  deemed  guilty  of  a  misdemeanor,  and  shall  be  subject,  \ipon  con- 
viction, to  a  hue  of  not  more  than  $5, 000,  or  imprisonment  for  a  term  not  to  exceed 
three  years,  or  by  both  such  fine  and  imprisonment. 

Sec.  11.  That  any  commo)i  carrier  by  water  or  by  railroad  or  other  person  subject 
to  this  act,  or  whenever  such  carrier  or  person  is  a  corporation,  any  director,  officer, 
receiver,  trustee,  lessee,  or  agent  of,  or  person  acting  for  or  employed  by  such  corpora* 
tion  who  alone  or  w  ith  any  other  person  willfully  does  or  causes  to  be  done  or  w  illingly 
suffers  or  permits  to  be  done  any  act,  matter,  or  thing  in  this  act  prohibiting  or  declared 
to  be  unlawful,  or  who  aids  or  abets  therein,  or  violates  any  order  or  regulation  made 
by  the  board  in  ])ursuance  of  the  provisions  of  this  act,  or  who  aids  or  abets  therein, 
or  willfully  omits  or  fails  to  do  any  act,  matter,  or  thing  in  this  act  required  to  be 
done,  or  causes  or  willingly  suffers  or  permits  any  act,  matter,  or  thing  so  directed  or 
required  by  this  act  to  be  done  not  to  be  so  done,  or  aids  or  abets  any  such  omission 
or  failure,  or  is  guilty  of  any  violation  of  this  act,  or  who  aids  or  abets  therein,  shall 
be  guilty  of  a  misdemeanor,  and  upon  cojuiction  thereof  in  any  district  coiut  of  the 
United  States  within  the  jurisdiction  of  wluch  such  offense  was  committed  shall, 
except  as  in  this  act  otherwise  provided,  be  subject  to  a  fine  of  not  to  exceed  $5,000 
for  each  offense:  Provided,  That  any  person  convicted  as  aforesaid  of  a  A-iolation  of 
sections  5,  0,  or  9  of  this  act  shall  be  subject  to  a  fine  of  not  more  than  ?1,000  for 
each  day  during  wliich  such  A'iolation  continues:  Provided  further,  That  any  person 
convicted  as  aforesaid  of  a  violation  of  section  8  of  this  act  shall  be  subject  to  a  fine 
of  not  to  exceed  $1,000  for  each  offense. 

Every  violation  of  this  act  shall  be  prosecuted  in  any  court  of  the  United  States 
having  jurisdiction  of  crimes  within  the  district  in  which  such  violation  was  com- 
mitted, or  through  which  the  transportation  may  have  been  conducted;  and  wdienever 
the  offense  is  begun  in  one  jurisdiction  and  completed  in  another  it  may  be  dealt 
with,  inquired  of,  tried,  determined,  and  punished  in  either  jui'isdiction  in  the  same 
manner  as  if  the  offense  had  been  actually  and  wholly  commiited  therein. 

Sec.  12.  That  any  person  who  .shall  be  injured  in  his  business  or  property  by  reason 
of  any  common  carrier  by  water  or  by  rail,  or  other  person  subject  to  this  act.  doing, 
causing  to  ))e  done,  or  permitting  to  l)e  done  any  act,  matter,  or  thing  in  this  act  pro- 
hibited or  declared  to  be  unlawful,  or  omitting  to  do  any  act,  matter,  or  thing  in  this 
act  required  to  be  done,  may  sue  therefor  in  any  district  court  of  the  United  States 
in  the  district  in  wliich  the  defendant  resides  or  i-^  found,  or  has  an  agent  without 
respect  to  the  amount  in  controversy,  and  shall  recover  double  the  damages  by  him 
sustained,  and  the  cost  of  suit,  including  a* reasonable  attorney's  fee. 

Sec.  13.  That  it  shall  be  the  duty  of  every  common  carrier  by  water  or  other  person 
sul)ject  to  this  act.  within  sixty  days  after  the  taking  effect  of  this  act,  to  designate 
in  w-riting  an  agent  in  the  city  of  Washington,  T3i.strict  of  Columbia,  upon  wdiora 
service  of  all  orders,  notices,  and  processes  may  be  made  for  and  on  behalf  of  said 
common  carrier  or  person  in  any  proceeding  or  suit  pending  Ijefore  the  board,  and  to 
tile  such  de.signation  in  the  ofHce  of  the  .secretary  of  the  board,  which  designation 
may  from  time  to  time  be  changed  by  like  writing  similarly  fded:  that  thereupon 
service  of  all  orders,  notices,  and  proces.ses  may  be  made  upon  such  carrier  or  per- 
son by  leaving  a  copy  thereof  with  such  designated  agent  at  his  office  or  usual  place 
of  residence  in  the  city  of  Washington  with  like  effect  as  if  made  personally  upon 
such  carrier  or  person;  and  in  default  of  such  designation  of  such  agent  service  of  any 
order,  notice,  or  process  in  any  proceeding  before  the  board  may  be  made  by  post- 
ing a  copy  of  such  notice,  order,  or  process  in  the  office  of  the  secretary  of  the  board. 

Sec.  14.  That  the  board  shall  execute  and  enforce  the  provisions  of  this  act.  in  so 
far  as  they  may  be  applicable  to  the  enforcement  of,  and  not  inconsistent  with  this 
act,  there  is  hereby  made  applicable  to,  incorjiorated  in,  and  made  a  part  hereof, 
all  the  provisions  of  the  acts  entitled  "An  act  to  regulate  commerce,"  approved 
February  fourth,  eighteen  hundred  and  eighty-seven;  "An  act  making  appropria- 
tions to  supply  urgent  defitiencies  in  appropriations  for  the  fiscal  year  nineteen  hun- 
dred and  tliirteen,  and  for  other  purposes,"  approved  October  twxnity-second,  nine- 
teen hundred  and  thirteen;  "An  act  in  relation  to  testimony  before  the  Interstate 
(Commerce  Comnussion,  and  in  ca.ses  or  proceedings  under  or  connected  with  an  act 
entitled  'An  act  to  regulate  commerce,'  a])pr()ved  February  fourth,  eighteen  hundred 
and  eighty-seven,  and  amendments  thereto."  apl)ro^'ed  Fe])ruary  eleventh,  eighteen 
hundred  and  ninety-three;  "An  act  defining  the  right  of  immunity  of  witnes.ses  under 


10  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

the  act  entitled  "An  art  in  relation  to  testimony  l)efore  the  Inlerslate  Commerce  Com- 
mission,' and  so  forth,  approved  l-'ebniary  eleventh,  ei^diteen  hundred  and  ninety- 
three,  and  an  act  entitled  'An  act  to  establish  the  Department  of  Commerce  and 
Labor,'  approved  Febriiary  fourteenth,  nineteen  hundred  and  three,  and  an  act 
entitled  "An  act  to  further  refjulate  commerce  ^\^th  foreii,'n  nations  and  amons?  the 
States.'  approved  February  nineteenth,  nineteen  huiidrcd  and  lhre(>.  and  an  act 
entitled  "An  act  makinir  appropriations  for  the  leirislaiive,  executive,  and  judicial 
expenses  of  the  Government  for  the  fiscal  year  endinc:  June  thirtieth,  nineteen  hun- 
dred and  four,  and  for  other  ])urposes.'  approved  F'ebruary  twenty-fifth,  nineteen 
hundred  and  three."  approved  June  thirtieth,  nineteen  hundred  and  six;  ''An  act 
to  further  re,e;ulate  commerce  with  foreign  nations  and  among  the  States."  apj)roved 
February  nineteenth,  nineteen  hundred  and  three:  "An  act  to  expedite  the  hearing 
and  determination  of  suits  in  equity  pending  or  hereafter  brought  under  the  act  of 
July  second,  eighteen  hundred  and  ninety,  entitled  'An  act  (o  i)rotect  trade  and  com- 
merce against  unlawful  restrainis  and  monopolies."  '.\n  act  to  regulate  commerce.' 
approved  February  fourth,  eighteen  hundred  and  eighty-seven,  or  any  other  acts 
having  a  like  purpose  that  may  be  hereafter  enacted,"  approved  February  eleventh. 
nineteen  hundred  and  three,  and  all  acts  amendatory  thereof. 

Sec.  lo.  That  to  carry  out  and  give  effect  to  the  provisions  of  this  act,  the  board  is 
authorized  to  emi^loy  such  experts  and  other  assistants  as  may  be  necessary,  and  to 
appoint  special  agents  or  examiners  who  shall  have  powers  to  administer  oaths, 
examine  witnesses,  and  take  testimony. 

Sec.  16.  That  this  act  shall  not  be  construed  to  afifect.  or  in  any  wise  reduce  or 
impair  the  present  power  of  the  Interstate  Commerce  Commission  over  rates,  or  any 
other  subject  matter  heretofore  committed  to  its  jurisdiction  and  control. 

Dr.  Emory  R.  Johnson,  of  Philadelpliia,  is  hore  this  morning  and 
I  will  ask  him  to  make  a  statement  to  the  committee. 

STATEMENT  OF  DR.  EMORY  R.  JOHNSON,  PHILADELPHIA, 
PA..  PROFESSOR  OF  TRANSPORTATION  AND  COMMERCE, 
UNIVERSITY  OF  PENNSYLVANIA.' 

The  Chairman.  You  have  studied  the  provisions  of  XL  K.  14337'^ 

Dr.  Johnson.  I  have  gone  over  it  with  some  care,  Judge. 

The  Chairman.  You  are  also  familiar  with  the  provisions  of  H.  R. 
450,  are  you  not  ^ 

Dr.  Johnson.  I  am;  or  at  least  I  was. 

The  Chairman.  I  recall  that  you  reviewed  the  provisions  of  that 
bill  at  one  time  in  an  article,  and  while  that  bill  was  in  preparation  I 
recall  that  Dr.  lluehner  and  1  had  the  benefit  of  your  advice  and 
service  in  framing  the  bill.  We  would  be  pleased  now  to  have  you 
proceed  and  give  us  your  views  on  this  bill. 

Dr.  Jonxsox.  ^Ir.  Cliairman,  I  think  it  is  un(U>rstood  by  the  com- 
mittee that  I  ai)pear  here  to-day  upon  your  invitation  and  not  uj)on 
my  own  suggestion;  by  wliicli  1  mean  that  1  am  very  glad  to  come 
if  I  can  l)e  of  any  assistance  to  the  committee.  That  is  my  only 
reason. 

The  Chairman.  1  invited  Dr.  Johnson  to  come  for  lh(>.  reason  I 
have  stated,  that  when  we  liad  up  the  preparation  of  II.  R.  17328, 
in  the  Sixty-third  Congress — of  which  li.  R.  450  is  an  exact  copy — 
the  bill  under  consideration  being  a  co]iy  of  same,  Dr.  Johnson  gave 
us  the  ])ene(it  of  his  views  ojt  the  matter  and  of  liis  assistance,  and 
all  the  while  has  kept  in  touch  with  the  work  of  the  committee  and 
is  familiar  with  the  recommtMidations  of  the  committee  following  tlie 
investigation  of  what  is  known  as  the  Shipping  Trust. 

Dr.  Johnson.  It  seems  to  me,  Mr.  (Chairman,  that  1  may  most 
advantageously  present  a  brief  prepared  statement,  which  will  not 
take  me  more  than  15  miiuites  to  read,  setting  forth  the  main  provi- 


REGULATORY    FEATURES    OF    SHIPPIXG    BILL.  11 

sions  of  the  bill  and  discussing  certain  principles  which  it  seems  to 
me  support  and  justify  those  provisions. 

The  Chairman.  Before  doing  that.  Doctor:  you  are  an  author  of 
various  works  on  the  question  of  transportation  and  rates,  are  you 
not? 

Dr.  JoHNSOX.  I  did  publish  in  1911  a  book  upon  railroad  traffic 
and  rates  and,  in  1906,  a  book  on  ocean  transportation,  in  which  the 
subject  of  steamship  conferences  and  ocean  rates  was  discussed.  I 
have  also  published  other  discussions  of  the  subject  and  have  endeav- 
ored to  keep  myself  impartially  informed  on  the  subject  of  ocean 
transportation. 

Shall  I  proceed  ? 

The  Chairman.  Yes. 

Dr.  Johnson.  Believing  that  transportation  by  water  as  well  as 
by  rail  is  a  busmess  of  a  public  nature  that  should  be  performed  in 
accordance  with  the  stanclards  of  reasonableness  that  the  public  has 
come  to  expect  all  common  carriers  to  observe,  I  am  in  accord  with 
the  general  purpose  of  the  bill  now  before  the  committee.  The  meas- 
ure is  very  similar  to  the  ])ill  that  the  committee  reported  to  the  House 
in  1914,  and  which  would  probably, have,  ere  this,  been  enacted  mto 
law  had  not  events  in  Europe  given  legislation  on  maritime  and  many 
other  subjects  an  unexpected  turn. 

The  bill  under  consideration  bj'  the  committee  proposes  to  substi- 
tute Government  regulation  in  the  place  of  unregulated  competition 
and  micontrolled  monopoly  in  the  ocean  transportation  business, 
the  main  purposes  of  the  proposed  regulation  being  to  insure  fair 
methods  oi  competition,  to  put  a  limit  upon  private  monopoly  and 
to  prevent  unreasonable  discriminations  in  the  rates,  services,  and 
practices  of  ocean  carriers.  The  l)ill  seeks  to  extend  to  the  ocean 
transportation  business  the  standards  of  fair  competition  that  the 
act  to  create  a  Federal  trade  commission  requires  of  those  engaged 
in  commerce.  The  measure  aims  to  correct  the  evil  results  of  un- 
regulated, competition,  the  granting  of  rebates  to  favored  sliippers, 
the  running  of '"lighting  ships''  to  drive  out  undesired  competitors, 
and  the  penahzing  of  shippers  who  patronize  independent  carriers. 

The  bill  recognizes  tlie  fact  that  ocean  lines  will  inevitably  form 
associations  or  conferences  for  the  purpose  of  regulating  competition 
among  members  of  the  conference  and  between  the  lines  within  and 
those  outside  of  the  conference.  These  conferences  formed  by  the 
steamsliip  companies  are  deemed  by  the  companies  to  be  absolutely 
necessary,  and  the  investigations  made  b}'  tliis  committee  show  that 
the  conferences  have  been,  and  can  be,  of  service  both  to  the  carriers 
and  to  sliippers.  Tlie  bill  under  consideration  permits  such  con- 
ferences to  he  formed,  but  prevents  their  actions  from  being  injurious 
by  requiring  all  conference  agreements  to  be  subject  to  approval  b}' 
the  Government. 

It  must  be  evident  that  these  conferences  of  ocean  carriers  must 
either  be  prevented  or  regulated,  if  independent  American  hues, 
whether  under  private  or  Government  ownership,  are  to  engage  in 
the  future,  profitably,  in  the  South  American  and  other  trades.  The 
ocean  transportation  field  can  be  and  is  largely  preempted  by  the 
conference  lines  which,  when  it  is  to  their  advantage,  make  deferred 
rebate  contracts  with  the  larger  shippers  and  thus  close  the  door  of 
opportunity  to  the  independent   carrier  seeking  cargo   to  keep  his 


12  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

ships  regularly  and  full}*  oinployed.  It  is  necessary  that  the  ocean 
transportation  field  should  be  op(^n  to  all  carriers  on  like  terms. 
Unless  this  is  assured,  the  United  States  can  not  hope- to  make  much 
j)rogress  in  the  development  of  its  merchant  marine. 

It  seems  to  me  this  bill  is  fundamental,  then;  it  is  the  first  step  in 
the  development  of  a  merchant  marhie  under  present  conditions  of 
"conference''  regulation  of  the  ocean  transportation  business. 

Plaving  provided  for  preventing  unfair  competition  and  for  limiting 
monopoly  in  the  ocean  transportation  business,  the  bill  makes  it 
unlawful  for  common  carriers  by  water  to  make  unreasonable  dis- 
criminations in  rates  or  services  or  to  indulge  in  secret  preferential 
practices,  it  being  the  evident  purpose  of  the  bill  to  apply  to  carriers 
t)y  water,  in  so  far  as  applicable,  the  principles  that  have  successfully 
and  with  advantage  to  the  public  been  apphed  to  carriers  by  rail. 
The  bill  gives  the  board  entrusted  with  the  enforcement  of  the  act 
power  in  certain  conditions  to  fix  the  maximum  rates  charged  by 
ocean  carriers  in  the  foreign  trade.  As  this  is  such  an  important 
feature  in  the  bill,  and  inasmuch  as  it  is  especially  important  that 
these  features  of  the  bill  be  exactly  understood,  not  only  by  this  com- 
mittee but  by  others,  I  shaU  at  this  point  take  the  liberty,  with  your 
permission,  of  quoting  the  two  or  three  paragraphs  which  contain  the 
provisions  in  regard  to  regulation  of  rates. 

It  is  provided  by  the  bill : 

That  whenever,  after  full  hearing  upon  a  complaint,  or  under  an  order  for  inA-estiga- 
tion  made  by  the  board  on  its  own  initiative,  the  board  shall  be  of  opinion  that  any 
rates  or  charges  demanded,  charged,  or  collected  by  any  common  carrier  by  water  in 
foreign  commerce  are  unreasonably  high  or  unjustly  discriminatory  between  shippers 
or  ports,  or  unjustly  prejudicial  to  exporters  of  the  United  States  as  compared  with 
their  foreign  competitors,  or  represent  an  unjust  relation  between  classes  of  com- 
modities, the  board  is  hereby  empowered  to  determine  and  prescribe  what  shall  the 
just  and  reasonable  rates  and  charges  to  be  thereafter  observed  as  the  maximum  to  be 
charged  and  to  make  an  order  that  such  carrier  shall  cease  and  desist  from  publish- 
ing, demanding,  or  collecting  any  rate  or  charge  in  excess  of  the  prescribed  maximum, 
such  order  to  continue  in  force  for  such  peiiod  of  time,  not  exceeding  two  years,  as  shall 
t)('  prescribed  in  the  order  of  the  board,  unless  the  same  shall  be  suspendeil,  modified, 
or  set  aside  by  the  board  or  be  suspended  or  set  aside  by  a  court  of  competent  juris- 
diction. 

The  law,  however,  does  not  provide  that  the  board  shall  require 
carriers  by  water  in  foreign  commerce  to  file  their  rates  or  tariffs. 
Experience  will  show  whether  it  is  jiracticable  and  desirable  to  require 
ocean  carriers  in  the  foreign  trade  to  file  their  rates  and  to  charge 
oidy  such  rates  as  have  })oen  filed  with  the  Government.  This 
difference  between  the  pending  measure  and  the  present  interstate 
('omnKU'ce  law  is  of  present  importance.  This  bill,  if  enacted  into 
law,  wiU  provide  a  very  different  kind  of  regulation,  by  the  shipping 
])oard,  over  the  rates  of  ocean  earners,  than  the  Interstate  Com- 
merce C'ommission  exercises  over  carriers  by  rail.  In  the  case  of 
carriers  by  rail,  their  rates  must  be  published  and  filed  with  the  com- 
mission; only  the  piddished  rate  may  be  charged;  no  change  in  the 
rate,  up  or  down,  may  be  made  except  upon  30  days'  notice  to  the 
Government,  and  any  important  increase  in  rates  may  be  suspend  by 
the  Interstate  Commerce  Commission;  thus  giving  the  commission 
])racti(^al  control  over  the  rates  of  the  railroads.  There  is  no  such 
proposition  contained  in  the  proposed  measure. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  13 

The  proposed  measure  subjects  carriers  by  water  in  interstate 
commerce  to  somewhat  stricter  regulation  than  is  provided  for  car- 
riers by  water  in  foreign  commerce.     The  bill  provides: 

TKat  every  common  carrier  l)y  water  in  interstate  commerce  shall  establish,  observe, 
and  enforce  in  interstate  commerce  just  and  reasonable  rates,  fares,  and  charges  and 
just  and  reasonable  regulations  and  practices  effecting  classifications,  rates  or  tariffs, 
the  issuance,  form,  and  substance  of  tickets,  receipts,  and  bills  of  lading,  the  manner' 
and  method  of  presenting,  marking,  packing,  and  delivering  property  for  transporta- 
tion, the  carrying  of  personal,  sample,  and  excess  baggage,  the  facilities  for  trans- 
portation, and  all  other  niatters  relating  to  or  connected  with  the  receiving,  handling, 
transporting,  storing,  and  delivering  of  projjerty.  Whenever  the  board  shall,  upon 
formal  complaint  or  in  proceedings  instituted  of  its  own  motion  and  after  full  hearing, 
be  of  opinion  that  any  of  the  aforementioned  rates,  charges,  classilications,  regulations, 
or  practices  are  unjust  or  unreasonable,  the  board  is  hereby  empowered  to  determine, 
prescribe,  and  order  enforced  just  and  reasonable  rates,  charges,  clas,sifications, 
regulations,  and  practices. 

The  carriers  by  water  in  interstate  commerce  are  further  required 
to— 

*  *  *  file  with  the  board  and  keep  open  to  public  inspection,  in  the  form  and 
within  the  time  prescribed  by  the  board,  all  the  rates,  fares,  and  charges  for  transporta- 
tion between  different  points  on  its  own  route  and  points  on  the  route  of  any  other 
carrier  by  water  when  a  through  route  and  joint  rate  have  been  established,  and  if 
no  joint  rate  over  the  through  route  has  been  established  the  several  carriers  in  such 
through  route  shall  file  the  separately  established  rates,  fares,  and  charges  applied 
to  the  through  transportation.  No  increase  shall  be  made  by  such  carrier  in  the  rates, 
fares,  and  charges  or  joint  rates,  fares,  and  charges  which  have  been  filed  in  compliance 
with  the  requirements  of  this  section,  except  after  10  days'  notice  to  the  board,  whicli 
notice  shall  plainly  state  the  increase  proposed  to  be  made.  The  board  is  hereby 
empowered  to  determine  and  prescribe  what  shall  be  the  maximum  rates,  fares,  and 
charges  to  be  observed  and  charged  by  such  carrier  and  to  make  an  order  that  such 
carrier  shall  cease  and  desist  from  demanding  or  collecting  any  rate,  fare,  or  charge 
in  excess  of  the  prescribed  maximum,  such  order  to  continue  in  force  for  such  period 
of  time,  not  exceeding  two  years,  as  shall  be  prescribed  in  the  order  of  the  board, 
unless  the  same  shall  be  susjjended,  modified,  or  set  aside  by  the  board  or  by  a  court 
of  competent  jurisdiction. 

That  section  of  the  act,  Mr.  Chairman,  is  tlie  only  one,  so  far  as 
I  read  the  bill,  that  required  the  pul)hcation  and  filing  of  rates,  and 
those  are  joint  rates  applying  over  connecting  carriers. 

To  enable  the  board  to  carry  out  its  important  duties  it  is  given  full 
power  to  investigate  the  rates  and  practices  of  carriers  by  water,  and 
to  require  the  carriers  to  make  such  periodical  or  special  reports  as 
the  board  may  need  in  order  to  keep  fully  informed  regarding  the 
business  of  the  carriers. 

The  effective  powers  of  the  board  as  a  supervisory  and  regulatory 
body  are  strengthened  by  the  section  which  provides  that  the  pro- 
visions of  the  interstate  commerce  act  of  1887,  and  subsequent  laws 
for  the  regulation  of  railroads,  shall,  in  so  far  as  applicable  to  the 
business  of  ocean  transportation,  be  incorporated  in,  and  made  a  part 
of,  the  proposed  law.  It  is,  however,  wisely  provided  that  the  pro- 
posed act  ''shall  not  be  ^construed  to  affect,  or  in  anywise  reduce  or 
impair  the  present  power  of  tlie  Interstate  Commerce  Commission 
over  rates,  or  any  other  subject  matter  heretofore  committed  to  its 
jurisdiction  and  control." 

So  much,  Mr.  Chairman,  as  to  the  main  provisions  of  the  law. 
Now  a  few  words  as  to  the  general  ])rinciples  upon  which  this  bill  was 
framed. 

The  proposed  legislation  is  based  upon  principles  that  have  not 
hitherto  prevailed  in  the  laws  of  the  United  States  for  the  regulation 


14  REGULATORY    FEATURES    OF    SHIPPIXG    BILL. 

of  carriors,  whcthor  ])y  rail  or  by  water.  The  law  proposes  to  allow 
rival  steamship  lines  to  form  eoiiferences  and  to  enter  into  agreements 
as  to  rates  and  services;  it  proposes  to  regulate  rather  than  to  pro- 
hibit conferences  of  ocean  carriers.  In  the  past,  the  generally  ac- 
cepted theory  has  been  that  the  public  interest  required  that  compe- 
tition among  carriers,  whether  by  rail  or  by  water,  be  enforced  by 
■  law,  and  that  the  cooperation  as  well  as  combination  of  rival  carriers 
b(>  jiroliibited. 

AVliatever  the  theory  of  legislation  has  l)een,  tlie  fact  is  that  the  car- 
riers now  engaged  in  the  foreign  trade  of  the  United  States  are  practi- 
cally all  members  of  conferences.  The  investigations  maile  by  this 
committee  established  this  fact  beyond  question,  it  having  been 
found  by  the  committee  that — 

It  is  the  almost  universal  practice  for  steamship  lines  engaging  in  the  American 
foreign  trade  to  operate,  both  on  the  inbound  and  outbound  voyages,  under  the  terms 
of  written  agreements,  conference  arrangements,  or  gentlemen's  untlerstandings, 
which  have  for  their  principal  purpose  the  regulation  of  competition  through  either 
(1)  the  fixing  or  regulation  of  rates,  (2)  the  apportionment  of  traffic  by  allotting  the 
ports  of  sailing,  restricting  the  number  of  sailings,  or  limiting  the  volume  of  freight 
which  certain  lines  may  carry,  (3)  the  pooling  of  earnings  from  all  or  a  portion  of  the 
traffic,  or  (4)  meeting  the  competition  of  nonconference  lines. 

The  members  of  these  conferences  include  steamship  lines  under 
the  American  flag  and  under  foreign  flags.  Whether  it  would  be  pos- 
sible as  a  matter  of  practical  legislation  and  administration  to  prevent 
all  carriers,  foreign  as  well  as  American,  engaged  in  the  foreign  trade 
of  the  United  States  from  entering  into  conference  arrangements  and 
agreements  I  will  not  attempt  to  say.  It  is  probable,  however,  that 
a  law  ])rohibiting  conferences  could  be  enforcetl  more  effectively 
against  vessels  under  the  American  flag  than  against  vessels  under 
for.>ign  flags,  and  that  such  a  law  would  be  more  effective  against 
conferences  formed  in  the  United  States  than  against  conferences 
formed  in  foreign  countries.  Without  going  into  this  phase  of  the 
subject  in  any  detail,  it  seems  to  me  that  it  would  be  impracticable 
as  well  as  inadvisable  to  prohibit  steamship  conferences. 

This  is  equivalent  to  saying  that  the  proposed  legislation  proceeds 
in  the  riglit  direction.  It  permits  rival  steamsliip  lines  to  form  con- 
ferences and  to  enter  into  agreements  for  the  regulation  of  services 
and  rates,  but  subjects  the  agreements  and  all  the  rates  fixed  by 
agreements  to  government  knowledge  and  regulation.  Legislation 
of  this  kind  is  sound  in  priiu'ij)le  and  is  needed  in  the  public  interest. 

At  the  present  time  ocean  carriers,  both  coastwise  and  in  the 
foreign  trade,  form  conferences  and  miter  into  agreements.  Wliat 
transpires  in  those  conferences  and  what  agreements  are  entered  into 
are  kept  from  the  public.  Similarly  each  ocean  line  nuiy  make  secret 
rates  favoring  such  shi])pers  and  such  ports  as  it  may  wdsh  to  aid, 
there  being  nothing  to  prevent  secret  rebates  and  discriminations. 
In  a  word,  at  the  present  time,  ocean  carrier*  engaged  in  the  domestic 
and  foreign  trade  of  the  United  States  are  carrying  on  a  business  of 
a  public  nature  by  secret  methods,  and  are  being  permitted  to  estab- 
lish such  a  degree  of  monopoly  as  it  is  possible  by  combination  to 
maintain.  While  it  is  well  known  that  competition  is  active  in  many 
parts  of  the  ocean  transportation  business,  it  is  also  well  known  that 
powei-ful  steamship  lines  by  conferences  can  (>sta])lish  conditions 
which  contain  elements  of  monopoly.     Tlie  vei-y  j)Ui'pose  of  tlie  con- 


EEGULATORY    FKATUHKS    OF    SllIPPlNG    BILL.  15 

fercnco  agrecmoiits  is  to  limit  coinpctition.  Monopoly  is  the  opposite 
of  compotition. 

The  present  condition  of  unregulated  competition  in  ocean  trans- 
])ortati()n  is  desirable  neitlier  for  the  public  nor  for  the  carriers. 
ComjK'tition  must  be  regulated,  and  is  regulated — not  by  means 
known  to  the  public  and  sul)ject  to  Government  control — but  secretly 
by  combinations  of  the  carriers.  The  pu])lic  interest  requires  that 
the  agreements  of  carriers  shall  be  subjected  to  the  fullest  measure 
of  publicity,  and  that  the  rates,  practices,  and  services  of  ocean  car- 
riers shall  be  subject  to  ap])roj)riate  regulation  by  the  Federal 
Government. 

The  theory  in  accordance^  with  which  the  bill  has  been  framed  is 
that  the  law  for  the  regulation  of  carriers  by  water  sliall  state  with 
precision  what  is  required  of  carriers  as  regards  their  agreements, 
rates,  and  practices.  Instead  of  providing  in  general  language  that 
ocean  carriers  shall  not  charge  rates  that  are  unreasonably  high  or 
unjustly  discriminatory  as  between  persons,  places,  and  commodities, 
the  bill  contains  specific  prohibitions  and  a  series  of  defii.ite  require- 
ments. Deferred  rebates,  "fighting  ships,"  and  retaliation  against 
shipj^ers  are  prohibited.  The  ])ill  also  prohibits  unreasonable  dis- 
criminations in  charges  and  the  granting  of  special  rates  to  favored 
shii)pers.  The  carriers  are  recpiired  to  inform  the  Government  of  all 
agreements  with  each  other,  and  clianges  in  those  agreements  must 
receive  the  approval  of  the  shipping  board.  Carriers  by  water  in 
interstate  commerce  are  also  recpiired  to  hie  their  joint  or  interline 
rates  with  the  shipping  board.  If  the  charges  of  carriers  by  water, 
whether  in  interstate  or  foreign  commerce,  are  found  upon  investiga- 
tion to  be  mireasonable,  maximum  rates  may  be  established  by  the 
shipping  board.  The  proposed  act  thus  confers  specific  powers  upon 
the  shipping  board,  while  at  the  same  time  it  gives  the  board  a  large 
measure  of  discretionary  authority — it  being  left  with  the  shipping 
board  to  determine  what  reports  shall  be  required  of  carriers  by  water 
in  foreign  commerce  and  to  determine  to  what  extent  the  provisions 
of  the  interstate-commerce  act  and  other  laws  for  the  regulation  of 
commerce  will  be  found  to  apply  to  the  enforcement  of  the  pending 
act  should  it  become  a  law. 

The  experience  which  the  Interstate  Commerce  Commission  has 
had  in  the  regulation  of  carriers  by  rail  show^s  the  importance  of  m- 
cluding  m  an  act,  such  as  the  one  mider  consideration,  a  specific  and 
detailed  enumeration  of  the  prohibitions  and  requirements  imposed 
upon  the  carriers,  and  of  the  powers  that  may  be  exercised  by  the 
board  mtrusted  with  the  administration  of  the  act.  A  law  less  defi- 
nite than  the  one  proposed  w^ould  almost  certainly  lead  to  controversy 
and  litigation.  The  result  would  be  an  ineffective  and  unsatisfactory 
regulation  of  ocean  carriers. 

It  is  important  that  an  act  for  the  regulation  of  ocean  carriers  should 
not  take  from  the  Interstate  Commerce  Commission  any  of  its  powers. 
The  purpose  of  the  proposed  law  is  to  extend  the  scope  of  regulation 
of  transportation  w'ithout  limithig  or  conflicting  with  the  agencies  of 
of  administration  that  have  previously  been  established.  While  the 
Interstate  Conmnerce  Commission  has  certam  jurisdiction  over  such 
carriers  bv  water  as  unite  with  railroads  in  forming  through  routes, 
there  ought  to  be  no  conflict  of  jurisdiction  betAveen  the  Interstate 


16  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Commerce  Commission  and  the  proposed  sliipping  board.  This  con- 
flict of  jurisdiction  will  })r()bably  be  obviated  by  the  last  section  of 
the  proposed  law.  which  provid(>s  tliat  nothing  in  the  act  sliall  impair 
the  powers  of  the  Interstate  Connnerce  Connnission  over  mattei-s  now 
committed  to  its  jurischction. 

The  CuAiRMAX.  Referring  to  that  last  matter,  that  there  is  to  bo 
no  conflict  of  jurisdiction  between  this  board  and  the  Interstate  Com- 
merce Commission,  is  it  not  your  opinion  that  experience  may  de- 
velop a  situation  where  the  two  boards  must  act  jointly — that  is,  the 
Interstate  Commerce  Commission  and  tlu^  shipping  board — with 
reference  to  various  matt<'rs  and  provider  a  form  of  a.ihninistration  ? 

Dr.  JoHXSox.  I  thiidv  tluit  is  entireh'  possi})le,  Mr.  Chairman. 
The  two  fields  will,  of  course,  touch  each  other;  and  the  two  boards, 
in  dealing  with  practical  questions,  will  have  to  mark  out  the  limi- 
tations of  the  two  fields.  This  proposed  measure  would  be  incom- 
plete, however,  if  it  did  not  do  as  it  does  do — that  is,  make  perfectly 
clear  that  this  proposed  measure^  is  not  a  transfer  of  the  powers,  nor 
in  any  sense  an  infringement  upon  the  powers,  of  the  Interstate 
Commerce  Commission. 

The  Chairmax.  Yet  it  wifl  take  experience  to  develop  and  disclose 
just  where  this  joint  control  may  be  necessary? 

Dr.  JoHxsox.  I  think  it  will;  yes,  sir. 

The  Chairmax.  In  the  committee,  in  the  consideration  of  this  bill, 
the  question  has  come  up  with  reference  to  the  tramp  steamer.  We 
have  no  purpose  to  hamj^er  them  or  circumscribe^  their  activities  or 
limit  their  power  in  tlie  way  of  competition  and  tlie  regulation  of 
ocean  rates.  It  is  claimed  by  the  conference  lines  that  rates  are 
largely  controlled  by  charter  rates.  Now,  is  there  anything  in  this 
bill  which  would  do  that  ? 

Dr.  JoHxsox.  I  liave  read  the  l^ifl  carefully,  Mr.  Cluiirman,  with 
that  query  in  my  mind.  I  detun  it  impracticable  to  establish  in  the 
ocean  transportation  business  the  situation  that  has  been  establishwl 
in  the  rail  transportation  business,  namely,  that  only  the  published 
rates  on  file  witli  the  Government  may  be  charged.  There  is  nothing 
in  this  bill  which  requir(;s  the  owner  of  n  tramp  vessel  to  file  his  rates 
with  tlie  shipping  board.  Nor  is  there  anything  in  tliis  bill  that  will 
prevent  him  from  quoting  such  a  rate  to-day  as  he  deems  com- 
petitive conditions  require  him  to  quote.  He  is  limited  in  his  actio7i. 
so  far  as  I  can  discover,  only  by  the  section  of  the  bill 

Mr.  Hardy.  Section  3  ? 

Dr.- Johnson.  Section  3,  which  lays  down  certain  standards  of  fair 
competition.  If  he,  by  his  individual,  micon trolled  act,  violates 
those  standards,  he  runs  the  risk  of  a  complaint  l)y  a  rival  or  of  an 
investigation  by  the  shipping  board,  which  can  correct  liis  practice 
in  the  future. 

Tlie  Chairman.  In  other  words,  he  is  not  permitted  to  practice 
discrunination  as  between  shippers  or  ports  or  in  any  other  manner 
that  would  not  be  ])ermitted  to  the  regular  lines? 

Dr.  Johnson.  That  is  right. 

Mr.  Hardy.  As  I  understand  your  construction,  and  that  is  what 
seems  right  to  me,  an  individual,  single,  line,  or  single  shij)owner, 
having  no  agreement  witli  any  otlier  sliipowner,  is  a  free  lance  as  far 
as  rates  are  concerned,  ])rovided  he  does  not  discriminate  between 
persons  or  places? 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  17 

Dr.  JoiLWsoN.  That  is  my  undorstanding  of  the  })ill. 

Mr.  Hardy.  And  this  bill  does  not  attempt  to  give  the  l)()ard 
authority  to  fix  rates  that  shall  he  charged,  but  they  have  the  I'iglit 
to  prevent  siieli  discriminations  by  the  c()m])ination  lines  or  the  con- 
ference lines  ? 

Dr.  Johnson.  Your  statement  is  in  accordance  with  my  under- 
standing, and  I  think  it  well  to  emphasize  a  distinction  that  should 
be  kept  in  mind.  The  powers  conferred  by  this  bill  upon  the  pro- 
posed shipping  board  are  purely  corrective  powers  as  regards  rates. 
They  are  not  powers  to  prescribe,  ab  inito,  a  scheme  of  rates  or  a 
system  (»f  rates  to  prevail  in  the  field  of  ocean  transportation.  The' 
line  cari-iers,  or  individual  shipowners,  will  go  ahead  after  this  law  is 
passed  and  work  out  their  own  rates,  and  will  not  even  be  obliged  to 
file  them  with  the  Government  unless  they  are  joint  rates. 

Dr.  Hahdy.  That  is,  you  mean  unless  they  are  conference  rates? 

Mr.  Johnson.  No;  unless  they  are  joint  interline  rates  over  two 
c;)nnecting  water  carriers. 

.The  ('Iiatrman.  That  is  the  interstate  commerce  act? 

Dr.  Johnson.  The  interstate  commerce,  act  gives  the  commission 
jurisdiction  over  joint  routes  and  joint  rates  by  rail  and  water  lines, 
including  the  wator  portion  of  the  joint  route.  This  bill  deals  with 
joint  routes  over  connecting  carriers  by  water  and  the  shipping  board 
may  require  those  interline  water  rates  to  be  filed.  But  those  are 
the  only  rates  that  have  to  be  filed  with  the  board.  All  other  rates 
are  made  by  the  several  steamship  lines  as  they  think  best — of  course 
subject  to  the  general  limitations  and  requirements  in  this  bill  as  to 
fair  competition.  The  same  is  true  of  the  tramp  steamer  and  even 
perhaps  in  a  larger  degree,  because  the  practice  of  tramp  steamers  is 
to  make  rates  not  for  periods  of  time  or  by  schedules  but  v/ith  refer- 
once  to  a  particular  vessel  sailing  at  a  particular  time.  Do  I  make 
myself  clear? 

Mi\  Byrnes.  Doctor,  how  do  you  construe  section  6  on  page  10  ? 

Dr.  Johnson.  That  section  states  that  every  common  carrier  by 
water  in  interstate  commerce  shall  establish,  observe,  and  enforce  in 
interstate  commerce  just  and  reasonable  rat'^s,  fares,  and  charges  and 
just  and  reasonable  regulations  and  practices  affecting  classifications, 
rates,  or  tarifi^s,  and  so  forth. 

Mr.  Byrnes.  Now  the  last  part,  beginning  in  line  23,  ''Whenever 
the  board  shall,  upon  formal  complaint  or  in  proceedings  instituted 
of  its  own  motion." 

Dr.  Johnson.  The  early  part  of  the  section  which  I  read  imposes 
upon  the  carriei's  when  they  make  their  rates  the  standards  of  reason- 
ableness. The  latter  part  of  the  paragraph  to  which  you  specifically 
refer  gives  the  board  the  power  to  determine  in  particular  cases 
wheth(vr  that  standard  of  reasonableness  has  been  observed  or  not. 
If  the  ])oard  finds  it  has  been  violated  the  board  can  correct  what  has 
been  done. 

Mr.  Byrnes.  And  onU^r  in  force  what  they  consider  to  be  just  and 
reasonable  rates? 

Dr.  Johnson.  Yes. 

Mr.  Byrnes.  That  is  just  interstate.  Now,  as  to  foreign,  is  there 
not  the  same  provision  in  section  5 — th(?  power  to  fix  a  maximum 
rate  ? 

38534—16 2 


18  REGULATORY    FEATURES    OF    SHIPPING   BILL. 

Dr.  JoHxsox.  A  similar  jiowor  is  ihovo  granted.  Tho  ])art  that 
possibly  you  have  in  mind  is  tliat  the  bill  does  not  limit  the  extent  to 
which  the  shippuig  board  may  fix  rates  nor  limit  the  time  wliieh 
those  rates  shall  remain  m  force. 

Mr.  Byrnes.  I  was  only  inquiring  because  I  understood  you  to  say 
that  they  had  nothing  to  do  with  the  fixing  of  rates  or  regulating. 
Possibly  I  may  have  misunderstood  you. 

Dr.  Johnson.  I  did  not  intend  to  say  quite  that.  The  board  has 
the  power  to  correct  a  rate  upon  complaint  or,  upon  investigation , 
upon  their  own  mitiative.  The  rates,  however,  are  made  da}^  by  day 
by  the  tramp  carrier.  Wliat  the  board  does  is  to  pass  in  judgment 
upon  what  the  carrier  does  upon  his  own  initiative.  Now,  in  actual 
practice  what  would  come  before  the  board  would  be  a  complaint  not 
against  the  rates  m  general  of-  an  ocean  carrier  but  a  complaint 
against  certain  specific  charges;  and  any  correction  that  the  board 
would  make  would  deal  with  individual  specific  rates  and  not  witli  a 
general  schedule  or  classification  of  rates.  The  act  hi  its  practical 
workings  would,  I  think,  not  transfer  to  the  board  the  general  rate- 
makmg  function. 

Mr.  Burke.  Doctor,  permit  a  question.  In  section  5,  commenchig 
on  line  20,  "prescribe  what  shall  be  the  just  and  reasonable  rates  and 
charges  to  be  thereafter  observed  as  the  maximum";  that  is,  the 
board  is  empowered  to  do  that  after  an  investigation  upon  complahit 
made.  What  I  desire  to  know  is,  Will  the  tramp  ship  be  bound  by  any 
maximum  rates  that  the.  board  may  make  as  a  result  of  an  investiga- 
tion of  a  complamt  ? 

Dr.  Johnson.  Of  course  the  order  will  run  against  the  specific 
carrier;  it  could  not  run  against  any  other  carrier  than  that  one.  And 
if  any  other  carrier  deemed  the  conditions  of  transportation  to  be 
different — conditions  of  competition  and  conditions  of  transportation 
to  be  different — than  they  were  when  the  order  was  issued  against  the 
other  carrier,  1  would  say  that  the  tramp  owner  would  be  free  to  take 
such  action  as  he  deemed  to  be  permissible  under  the  requirements  of 
the  act.  In  other  words,  to  answer  specifically,  I  do  not  thmk  an 
order  running  against  me  to-day  would  necessarily  apply  against  you 
to-morrow. 

Mr.  BuHKE.  But  the  maxhnum  fixed  to-day  agahist  a  given  tramp 
ship  would  continue  against  that  ship,  if  it  continued  in  the  same 
route,  until  changed  ? 

Dr.  JoHNSOx.  It  would  continue  as  long  as  the  order  of  the  l)oard 
ran.  It  is  customary  to  put  a  two-year  limit  on  orders  of  the  Inter- 
state (commerce  Commission.  And,  in  fact,  orders,  I  thiid<,  are 
limited  to  a  two-year  periotl  by  the  bill. 

The  CiiAJHMAX.  1'here  is  a  two-year  lijiiit  in  tliis  connection  also — 
it  is  not  to  exceed  two  ytnirs  that  the  order  shall  I'un. 

Mr.  Hardy.  Then  this  section  5  only  prescribed  the  fixing  of  the 
maxim ujn;  that  would  not  prevent  a  vessel  from  low(>ring  the  rate? 

Dr.  Johnson.  Oh,  no.  It  does  not  prescribe  the  absolute  nor 
minimum  rate  'f 

Mr.  Greexe.  I  am  very  sorry  I  was  not  here  all  the  time  you  were 
talking,  but  frojn  what  I  did  hear  it  seemed  to  me  you  made  the  state- 
ment that  interstate  commerce  would  be  restricted  or  jnore  re- 
stricted than  the  regulation  of  foreign  cojnmerce.  That  is  to  say, 
this  bill  would  affect  more  paiiicularly  tiie  interstate  coiujnerce,  the 


EEGULATOKY    FP^ATUEES    OF    SHIPPlXd    15] LL,  19 

coastwise  traffic,  rather  than  the  ocean  traffic,  and  would  affect  com- 
petition in  the  coastwise  traffic  more  than  it  would  in  the  over-seas 
traffic.     Ain  I  correct  in  that  ? 

Dr,  Johnson.  Essentially.     What  I  said  was  that  the  regulation — - 

Mr.  Greene.  I  did  not  lioar  all  you  said,  because  I  Wiis  unfortu- 
nately called  out. 

Dr.  Johnson.  What  I  said  was  the  proposed  measure  subjects 
carriers  by  water  in  interstate  commerce  to  a  somewhat  stricter  regu- 
lation than  is  provided  for  carriers  by  water  in  foreign  commerce. 
And  then  I  called  attention  to  the  second  paragraph  of  section  6, 
w4iich  gives  the  shipping  board  authority  to  require  tlie  fihng  of  the. 
interline  rates  on  two  connecting  carriers  by  water  in  interstate  com- 
merce. In  the  absence  of  an  interhno  rate  fixed  l)y  the  carriers  form- 
ing a  joint  route,  the  board  may  require  the  separate  rates  which 
each  carrier  charges  for  tlie  joint  haul  to  be  filed  with  the  board. 
And  the  rate  thus  filed  can  not  be  changed  except  upon  10  days' 
notice. 

That  is  a  kind  of  a  provision  that  is  rather  important  and  it  does 
not  apply  to  carriers  in  the  foreign  commerce. 

Mr.  Greene.  The  purpose  of  this  bill,  as  I  understand  it,  was  to 
make  it  easier  for  Americans  to  do  business  in  tlie  foreign  trade. 
Now,  is  it  necessar}'^  to  interfere  with  the  interstate  commerce  in 
order  to  make  the  ocean  commerce  more  advantageous  to  people 
who  v/ant  to  enter  into  that? 

Dr.  Johnson.  Possibly  you  state  one  purpose  rather  than  aU  the 
purposes  of  the  bill. 

Mr.  Greene.  I  have  stated  the  purpose  that  struck  nie  most  forci- 
bly in  what  I  heard  you  say.  I  did  not  hear  it  all;  but  I  thought 
from  what  I  heard  you  say,  as  I  understood  you,  that  you  said  this 
bill  would  particularly  affect  the  interstate  commerce,  but  it  could 
not  reach  all  the  elements  of  the  foreign  commerce.  The  point  I 
want  to  make  is  this:  This  bill  it  seems  to  me — I  may  be  incorrect  in 
it — is  not  ])eneficial  to  the  American  shipper,  but  is  rather  in  the 
interests  of  the  foreign  shipper.  The  American  shipowner  who  goes 
into  the  trade,  or  is  in  it  now,  or  has  been  in  it,  and  has  his  business 
established,  is  more  likely  to  be  interfered  wdth  by  this  bill  than  he 
would  if  the  bill  was  not  enacted  into  law.  The  men  who  have 
established  a  foreign  trade,  have  established  it  with  a  great  deal  of 
competition,  and  that  competition  is  liable  to  be  very  much  more 
severe  when  this  war  is  over — I  do  not  know  when  that  will  be — it 
will  be  very  much  greater,  and  there  will  be  a  great  many  more 
entanglements  to  which  the  American  shipowner  will  l>e  subjected 
by  reason  of  the  enactment  of  this  bill. 

Now,  I  want  to  know  wherein  the  bill  in  an}-  way  provides  any 
more  freedom  or  more  opportunity  or  more  advantage  to  the  Amer- 
ican shipper  than  there  would  be  if  this  bill  was  not  put  into  law. 
Does  not  tliis  tie  the  American  shipper  up  more  and  more;  and  it  is 
not  to  get  at  the  foreign  shipper,  because  the  foreign  shipper  can  not 
be  reached  except,  of  course,  he  comes  hito  ovu-  ports  and  thus  be 
subject  to  the  same  restrictive  regulations;  but  ho  will  keep  out  of 
our  ports  and  do  liis  dir(>ct  foreign  trade  without  coming  in,  which 
we  want  to  get. 

Dr.  Johnson.  Your  question  is  so  full}'  stated  that  the  reasons 
back  of  it  are  made  clear. 


20  EEGULATORY   FEATUEES   OF    SHIPPING   BILL. 

Mr.  Greene.  Yes. 

Dr.  Johnson.  And  it  is  those  reasons  I  will  attempt  to  consider 
very  briefly. 

^Ir.  Greene.  What  do  j'oii  mean  by  the  ''reasons  back  of  it?'' 

Dr.  Johnson.  The  reasons  for  asking  the  question. 

]\Ir.  Greene.  That  is  what  I  want  to  know.  I  do  not  ask  the 
question  in  an}^  sense  of  being  a  shipowner,  which  I  am  not,  and 
never  did  own  a  cent's  worth  of  stock  in  a  ship.  I  want  to  get  the 
purpose  of  this  bill,  if  I  can.  It  seems  to  me,  as  far  as  I  read  it, 
it  is  not  advantageous  to  American  shipping. 

The  Chairman.  The  American  exporters,  though,  think  it  is. 

Mr.  Greene.  The  men  I  hear  from  do  not  think  so. 

The  Chairman.  You  may  be  sure  they  are  not  shipowners. 

Mr.  Greene.  I  do  not  know. 

The  Chairman.  You  will  find  out  w^lien  they  come'^ 

Mr.  Greene.  I  have  a  telegram  I  would  like  to  read  here. 

The  Chairman.  I  suggest  that  you  wait  until  Dr.  Johnson  answers 
the  ciuestion.     I  beg  your  pardon,  Doctor,  for  interfering  myself. 

Dr.  Johnson.  It  would  be  accomplishing  the  opposite  of  what  is 
intended  if  the  result  of  this  bill  was  to  make  it  more  difficult  for 
American  shipowners  to  enter  the  business  of  ocean  transportation 
and  if  it  were  made  more  difficult  for  the  American  merchant  marine 
to  develop.  Your  feeling  is,  if  I  get  your  thought  correctly,  that  by 
imposing  the  requirements  of  this  law  upon  ocean  transportation, 
upon  the  ocean  carriers,  the  effect  may  be  to  make  it  more  difficult 
for  American  shippers  to  enter  the  field  and  develop  a  merchant 
marine  ? 

Mr.  Greene.  Then  I  am  attacking  it  on  the  ground  that  they  will 
be  subject  to  foreign  competition,  which  was  severe  for  a  great  man}^ 
years — a  well-established  competition — and  is  to-day  well  estab- 
lished, notwithstanding  the  war;  that  when  the  war  is  over  the 
competition  w^ill  be  very  much  more  severe,  and  w^e  are  not  able  to 
get  at  that  and  try  to  destroy  it — we  may  try  to  destroy  it.  but  our 
measures  will  be  ineffective — and  at  the  same  time  it  will  bind  the 
liands  and  tie  the  feet  of  the  American  shipowner  and  the  American 
exporter. 

Dr.  Johnson.  That  very  question  was  considered  in  general  terms 
in  w^hat  I  stated  in  the  beginning  and  with  your  permission  I  will 
restate  that,  and  then  extend  the  thought  slightly.  What  I  said  was 
that  it  must  l)e  evident  that  these  conferences  of  ocean  carriers  must 
either  be  pi-ovented  or  regulated,  if  independent  American  lines, 
whether  under  ])rivate  or  Government  ownership,  are  to  engage  in 
the  future,  ])i'ofitably,  in  the  South  American  and  other  trades.  The 
ocean  transj)ortation  i'u'ld  can  be  and  is  largely  preempted  by  the 
confcirence  lines  which,  when  it  is  to  their  advantage,  make  deferred 
rebate  contracts  with  the  larger  shippers  and  thus  close  the  door  of 
opportunity  to  the  independent  carrier  seeking  cargo  to  keep  his 
smps  regulailv  and  fully  (nnployed.  It  is  necessary  that  the  ocean 
transportation  field  should  be  open  to  all  carriers  on  like  terms. 
Unless  this  is  assured,  the  United  States  can  not  hope  to  make  much 
progn^ss  in  the  develo]un(Mi1  of  its  merchant  marine. 

In  order  to  engage  yM'ofitubly  in  a  trade  })etween  the  Ignited  States 
and  South  Anuu'ica,  a  new  steamsliip  line  must  enter  an  open  trans- 
portation fi(\ld.     The  conferences  now  liave  covered  the  larger  part 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  21 

of  the  traflic  from  South  America  to  the  United  States  by  coiiferenco 
agreements  including  the  deferred  rebate  contract.  ""I'he  great  diffi- 
culty of  starting  a  new  line  from  the  United  States  to  South  America 
is  that  <a  large  number  of  the  big  shippers  hare  pledged  themselves  to 
patronize  only  the  existing  lines.  In  other  words,  the  conditions  of 
competition  at  present  are  unfair  to  the  now  line.  The  development 
of  the  merchant  marine  means  the  profitable  establishment  of  new 
lines  and  new  services.  And  it  seems  to  me  that  the  first  thing  that 
must  be  done  is  to  require  every  hne  that  enters  an  American  port, 
that  is,  engages  in  the  foreign  trade  of  the  United  States,  to  submit 
its  conference  agreements  to  an  American  board,  and  to  do  away  with 
these  secret  practices  which  now  close  the  field  against  fair  com- 
petition on  the  part  of  new  lines. 

I  have  answered  your  cpiestion  as  well  as  I  can. 

Mr.  RowE.  Now,  the  same  relation  practically  exists  in  other 
trades  besides  South  America? 

Dr.  Johnson.  I  take  that  simply  as  an  illustration. 

(Thereupon,  at  11.55  o'clock  a.  m.  the  committee  took  a  recess 
until  2  o'clock  p.  m.) 

AFTER    RECESS. 

The  committee  reconvened  pursuant  to  the  taking  of  recess. 

Mr.  Greene.  Did  you  complete  all  you  had  to  say  in  answer  to  my 
question  ? 

Dr.  Johnson.  Much  more  might  be  said. 

Mr.  Greene.  I  would  like  to  get  something  that  would  give  light 
on  what  I  asked  for.  If  you  want  to  enlarge  on  it,  I  am  willing  you 
should. 

The  Chairman.  I  thought  his  answer  was  complete. 

Mr.  Greene.  You  might  think  so,  but  it  seems  to  me  it  is  not,  and 
if  he  can  make  it  more  definite  I  would  rather  have  it,  even  though 
it  be  against  my  view.  I  wiU  ask  the  stenographer  to  read  my 
question. 

Tlie  Stenographer  (reading) : 

Then  I  am  attacking  it  on  the  ground  that  they  will  be  subject  to  foreign  competi- 
tion, which  was  severe  for  a  great  many  years,  a  well-established  competition,  and  is 
to-day  well  established,  notwithstanding  the  war;  that  when  the  war  is  over  the  com- 
petition will  be  very  much  more  severe,  and  we  are  not  able  to  get  at  that  and  try 
to  destroy  it — we  may  try  to  destroy  it,  but  our  measm-es  will  be  ineffective— and  at 
the  same  time  it  will  bind  the  hands  and  tie  the  feet  of  the  American  shipowner  and 
the  American  exporter. 

The  Chairman.  Now,  I  suggest  that  the  answer  of  Dr.  Johnson  to 
your  question  be  read  also. 

The  Stenographer  (reading) : 

That  very  question  was  considered  in  general  terms  in  what  I  stated  in  the  begin- 
ning, and  with  yom-  permission  I  will  restate  that  and  then  extend  the  thought 
slightly.  What  I  said  was  that  it  must  be  evident  that  these  conferences  of  ocean 
carriers  must  either  be  prevented  or  regulated,  if  independent  American  lines,  whether 
imder  private  or  Government  ownership,  are  to  engage  in  the  future  profitably  in 
the  South  American  and  other  trades.  The  ocean  transportation  field  can  be  and  is 
largely  preempted  by  the  conference  lines  which,  when  it  is  to  their  advantage, 
make  deferred  rebate  contracts  with  the  larger  sliippers,  and  thus  close  the  door  of 
opportunity  to  the  independent  carrier  seeking  cargo  to  keep  his  sliips  regularly  and 
fully  employed.     It  is  necessary  that  the  ocean  transportation  field  should  be  open 


22  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

to  all  carriers  on  like  terms.     Unless  this  is  assured  the  United  States  can  not  hope  to 
make  much  progress  in  the  development  of  its  merchant  marine. 

In  order  to  engage  profitably  in  a  trade  between  the  United  States  and  South 
America,  a  new  steamship  line  must  enter  an  open  transportation  field.  The  con- 
ferences now  have  covered  the  larger  part  of  the  traffic  from  South  America  to  the 
United  States  by  conference  agreements,  including  the  deferred  rebate  contract. 
The  great  difficulty  of  starting  a  new  line  from  the  United  States  to  South  America 
is  that  a  large  number  of  the  big  shippers  have  pledged  themselves  to  patronize  only 
the  existing  lines.  In  other  words,  the  conditions  of  competition  at  present  are 
■unfair  to  the  new  line.  The  development  of  the  merchant  marine  means  the  profit- 
able establishment  of  new  lines  and  new  ser^dces.  And  it  seems  to  me  that  the 
first  thing  that  must  be  done  is  to  require  every  line  that  enters  an  American  port — 
that  is,  engages  in  the  foreign  trade  of  the  United  States — to  submit  its  conference 
agreements  to  an  American  board  and  to  do  away  with  these  secret  practices  which 
DOW  close  the  field  against  fair  competition  on  the  part  of  new  lines. 

Mr.  Greene.  There  is  one  other  question  I  wanted  to  ask  you,  and 
that  is  this:  I  think  you  said  something  about  tramp  steamers  not 
being  subject  to  regidation,  did  you  not;  that  they  would  not  be  sub- 
ject to  reguUition  hke  the  other  hues? 

Dr.  JoHxsox.  Their  rates  woukl  be  subject  to  regulation  in  the 
sense  that  they  woidd  be  subject  to  correction  upon  complaint  and 
upon  investigation  by  the  shipping  board ;  but  each  tiamp  ship  owiter 
would  be  free  day  by  day  to  cjuote  such  rates  as  he  thought  the  cir- 
cumstances warranted. 

Mr.  Greene.  Is  not  that  a  rather  discrimination  in  favor  of  the 
tramp  steamei  ?  Are  not  the  tramp  steamers  the  principal  com- 
petitors in  that  trade  to-day;  and  if  they  are  free,  would  there  not 
be  a  discrimination  in  theii  favor  ? 

Dr.  Johnson.  As  was  stated  this  morning,  the  law  leaves  to  the 
steamship  lino,  as  well  as  to  the  individual  vessel  owner,  the  power  to 
make  and  c{Uote  rates.  The  rates  do  not  have  to  be  published  and 
filed  either  in  the  case  of  the  vessel  lines  or  the  tramp  steamers.  They 
wiU  have  to  be  made,  if  this  bill  should  become  a  law,  in  compliance 
with  certain  general  principals  and  requirements  set  forth  in  tlie  act; 
and  if  the  rates  are  violative  of  those  principles  they  may,  upon  com- 
plaint and  investigation,  be  corrected  by  the  shipping  board.  That 
IS  what  I  understand  the  proposed  law  to  be. 

^Ir.  Curry.  Would  we  have  the  authority  to  regulate  the  shipping 
rates  on  this  Government-owned  Braziliaii  line  under  this  law? 

Dr.  Johnson.  I  suppose  the  Brazilian  line  in  taking  traffic  out  of 
New  York  would  have  to  take  it  in  accordance  with  the  provisions 
of  this  law. 

Mr.  Curry.  From  Brazil  to  the  United  States  '. 

Dr.  Johnson.  Xo;  I  said  from  New  York,  outbound.  I  think  we 
might  have  the  theoretical  right  to  fix  the  rates  under  which  traffic 
shall  be  brought  into  this  country;  but  it  is  probably  not  a  right  that 
we  could  exercise  in  actual  practice. 

Mr.  C'l'RRY.  You  think  then  that  under  this  bill,  if  it  becomes  a  law, 
this  board  which  is  proposed  to  be  created  would  only  Itave  the 
authority  to  regulate  export  and  not  import  trade ''. 

Dr.  JoHXSOX.  I  said  as  a  matter  of  practical  enforcement  of  the 
law  I  doubted  whether  the  shipping  board  could  fix  the  rates  from  a 
foreign  port  to  the  United  States. 

Mr.  Hadley.  Then  there  could  be  no  such  thing  as  regulation  of 
foreign  commerce  or  the  deep-sea  commerce  coming  to  our  ports? 


EECiULATOHY    FEATURES    OF    SHIPPING    BILL.  23 

Dr.  fJoiiN.soN .  1  think  that  certain  practices  of  stoan:ship  coinpanies 
might  ho  roiriilated.  and  if  there  were  n-'.anifest  discrirrinations  as 
hetweeii  ports  I  think  possiV)ly  the  shipphig  hoard  could  correct  those 
discriininations.  But  as  for  saying  to  the  Tlanihurg-American  Co. 
what  rates  it  shall  charge  froTu  Hanihurg  to  the  United  States  that  is 
a  sovereign  j)o\ver  wliich  the  United  States  could  hardly  exercise  in 
practice. 

Mr.  C'ruuY.  I  agree  with  you. 

Dr.  JoHXSCiX.  I  say  that  for  the  reason  that  Germany  would  have 
the  same  power  that  we  would  have  and  it  might  well  happen  that 
Germany  would  hold  to  l>e  perfectly  lawful  rates  from  Ham})urg  to 
the  United  States  wiiich  our  shipping  hoard  would  hold  to  be  unlawful, 
and  tliere  would  follow  a  conflict  of  sovereignty  vdiich  miglit  make 
impracticahle  the  enforcement  of  the  provisions  of  tlie  act. 

Mr.  IIadley.  The  German,  French,  British,  and  the  Japanese  do 
make  discriminating  rates,  even  among  their  own  people,  and  they  do 
provide  for  rebates,  and  they  give  a  preference  to  one  shipper  over 
another  at  home:  and  under  this  bill  we  could  iiot  correct  that  evil. 

Dr.  Johnson.  I  think  we  could  require  every  line  engaged  in  com- 
merce at  an  American  port,  every  foreign  line  a  member  of  a  confer- 
ence, to  hie  with  the  shipping  board  a  copy  of  its  conference  agree- 
ment. I  think  we  can  throw  light  upon  practices  of  the  foreign 
steamship  companies. 

Mr.  Hadley.  But  not  correct  them  ( 

Dr.  Johnson.  How  far  we  can  go  in  actual  practice  I  am  not  pre- 
pared to  say.  I  do  think,  as  I  have  alread}^  stated,  that  it  would  not 
be  practicable  for  the  United  States  Government  actually  to  fix  the 
rates  from  foreign  ports  to  the  United  States. 

Mr.  Hadley.  Do  you  think  we  can  go  even  as  far  as  you  suggest 
without  changing  certain  treaties  ? 

Dr.  Johnson.  I  am  not  prepared  to  answer  that,  because,  candidly, 
I  have  not  examined  the  treaties  with  that  in  view. 

Mr.  Hadley.  I  mean  the  commercial  treaties,  of  course. 

The  Chairman.  Dr.  Johnson,  let  me  put  this  case  to  you:  Suppose 
ainanufacturer  in  the  United  States  was  submitting  a  bid  on  a  com- 
modity with  the  same  commodity  manufactured  in  England  to  a 
purchaser  in  Buenos  Aires.  There  is  a  steamship  line  from  England 
to  Buenos  Aires  and  a  steamship  line  from  the  United  States  to 
Buenos  Aires.  Now,  these  are  British-owned  lines,  members  of  the 
conference,  and  this  line  quotes  the  English  bidder  a  rate,  considering 
the  distance  and  the  service,  that  discriminates  in  favor  of  the  Eng- 
lish manufacturer  to  the  extent  that  the  American  bidder  can  not 
compete  with  him.  Is  it  your  opinion  that  under  the  provisions  of 
this  bill  that  line  might  be  compelled  to  treat  the  American  manu- 
facturer on  equal  terms  with  his  foreign  competitor  or  else  be  subject 
to  the  fuie  provided  in  this  bill:  or  you  might  go  even  so  far  as  to  say 
if  you  discriminate  against  the  American  manufacturer  we  will 
exclude  you  from  our  ports  ^ 

Dr.  Johnson.  As  you  have  stated,  I  thhik  the  American  representa- 
tive of  that  foreign  line  might  be  prosecuted  under  this  act  for  dis- 
crimination against  the  American  importer. 

The  Chairman.  These  are  both  exporters,  one  from  England  to 
South  America  and  one  from  the  United  States  to  South  America. 

Dr.  Johnson.  I  beg  your  pardon,  I  misunderstood  you. 


24  REGU1,AT0RY    FEATURES    OF    SlIIPPIXG    BILL. 

The  Chairman.  All  we  want  is  oquul  troatmeiit. 

Dr.  Johnson.  Yes.  I  think  tlie  inaltor  of  export  rates  clearly 
can  be  brouglit  in  practice  under  the  act.  My  ai^swer  to  Congress- 
man Curry  had  reference  to  rates  on  imports. 

Mr.  Edmonds.  You  mean  then,  Doctor,  foUowiiig  uj)  Mr.  Alex- 
ander's question,  that  you  could  take  the  agent  of  this  English  line — 
we  will  assume  it  is  an  English  line — running  boats  from  New  York 
to  South  America  and  from  England  to  vSouth  America — that  you 
could  take  him  to  task  for  an  act  committed  in  England,  entirely 
out  of  the  supervision  of  the  United  States,  and  it  would  not  lead  to 
international  complications  if  you  did  such  a  thing? 

The  Chairman.  I  did  not  say  anything  of  that  sort;  i  do  not 
want  you  to  inject  that  into  my  question. 

Mr.  Edmonds.  I  want  to  bring  it  in  because  it  is  necessary,  Mr. 
Cliairman. 

The  Chairman.  Oh,  no,  it  is  not  necessary  at  all.  I  am  assuming 
now,  as  a  matter  of  law,  that  we  may  compel  foreign  ships  entering 
and  trading  from  American  ports,  to  treat  us  right,  and  if  they  do 
not  they  can  not  come  to  our  ports.  Will  you  l)e  able  to  change  that, 
do  you  think  ? 

Mr.  Edmonds.  I  will  stop  nt  that  point,  then,  and  I  won't  say 
"international  complications";  I  will  say  this:  Could  you  take  an 
agent  in  New  York  to  task  for  an  act  committed  entirely  in  England 
and  under  English  supervision  ? 

The  Chairman.'  It  is  not  entirely  in  England.  That  ship  comes 
to  our  port,  the  vessel  comes  here,  and  that  contract  is  carried  out 
here.  In  other  words,  do  you  mean  to  say  because  a  contract  is 
made  abroad  and  partly  executed  in  this  country,  that  we  have  no 
jurisdiction  over  the  contract  or  its  terms,  or  how  it  may  be  enforced  ? 

Ml'.  Edmonds.  My  understanding  is  you  are  trying  to  find  out 
whether  we  would  have  any  control  over  agents  in  New  York  on 
account  of  making  a  higher  rate  here  than  th<\y  did  over  in  England 
to  South  Anierica. 

The  Chairman.  They  might  do  that,  and  under  the  provisions  of 
the  bill  you  could  even  go  to  the  extent  of  excluding  them  from  com- 
ing to  an  American  port. 

Mr.  Edmonds.  T  think  you  might  have  that  right.  The  only  ques- 
tion I  had  in  mind  was  what  it  might  lead  to. 

The  Chairman.  Yes — I  say  whether  we  shall  sul^mit  to  discrimi- 
nations such  as  that  supinely  without  any  effort  to  correct  it.  Some 
])eople  might  be  willing  to  submit  to  such  discriminations  as  that,  but 
1  do  not  care  to. 

Mr.  (JuRRY.  I  think  we  have  that  right,  and  I  hope  W{;  will  get  a 
bill  out  of  here  which  we  can  all  agree  can  be  enforced. 

I  think  possibly  you  may  not  have  understood  or  I  did  not  under- 
stand the  question  of  the  chairman.  I  understood  what  the  chairman 
intended  to  ask,  or  at  least  w^hat  I  understood  liim  to  ask,  was  that  a 
British  line  makes  a  contract  to  carry  goods  from  Liverpool,  we  will 
say,  to  Ruenos  Aires,  and  they  cany  those  goods  from  Liverpool  to 
Buenos  Aires  cheaper  than  the  same  line  carries  similar  goofls  from 
New  York  to  Buenos  Aires.  Under  this  bill  will  we  have  a  right  to 
compel  that  same  British  line  to  carry  from  New  York  to  Buenos  Aires 
as  cheap  as  they  do  from  Liverpool  to  Buenos  Aires? 


REGULATOKV    FKATUin:S    OF    SHIPPINC    BILL.  25 

Di-.  Johnson.  No;  we  would  not  havo  the  ri<rlit  to  compel  them  to 
(•hartje  tlie  same  rate,  but  we  would  have  a  right  to  eutertam  a  com- 
plaiut  against  the  rate  that  was  ((uoted  from.  New  York  and  to  test  the 
reasonableness  of  that  I'ate  on  thorougli  investiiration. 

Mr.  C'lhry.  Now  we  are  getting  at  it.  Then  tliis  board  would  have 
the  right  to  say  to  your  line  you  nmst  carry  the  goods  at  such  a  rate  ? 

Dr.  Johnson.  Yes;  the  act  gives  the  board  tlie  power  to  fix  a 
maximum  rate  for  a  particular  service. 

The  Chairalvn.  Equality  of  treatment  it  provides  for;  that  is, 
assuming  the  distance  is  the  same,  the  service  the  same,  and  the  cost 
the  same. 

Dr.  Johnson.  Of  course  it  does  not  follow  that  the  rate  would 
necessarily  be  the  same  from  New  York  as  from  England. 

The  Chairman.  Oh,  no. 

Dr.  Johnson.  The  service  might  be  different.  There  might  be 
difference  enough  in  the  two  services  to  warrant  a  difference  in  the 
rate. 

Mr.  Curry.  There  is  not  much  difference  in  the  ser^  ice  from 
fjiverpool  to  Buenos  Aires  antl  from  New  York  to  Buenos  Aires. 

^Ir.  liowE.  But  you  think  they  couhl  make  a  just  rate  from  New 
York,  based  on  the  rate  from  I^iverpool  ? 

Dr.  Johnson.  This  law  runs  upon  the  principle  that  rates  from 
New  York  to  Buenos  Aires  and  other  ])oints  shall  be  reasonable,  and 
it  gives  the  shipphig  board  the  ])ower  to  investigate  and  determine 
the  reasonableness  of  the  actual  rates. 

^fr.  Hardy.  And  if  the  board  should  fhid  this  particular  line  was 
discriminating  against  an  American  port  by  high  freights,  unreason- 
ably high,  and  low  freights  there,  possibly  making  up  on  our  high 
rates  what  they  lost  on  their  low  rates,  we  would  have  a  riglit  to 
forbid  that  practice  and  to  stop  it,  even  by  refusing  the  vessel  the 
right  of  clearance  from  our  port?     Would  that  be  your  idea? 

Dr.  Johnson.  My  idea  would  be  that  if  it  were  shown  that  the 
services  from  Liverpool  and  from  New  York  to  Buenos  Aires  were 
substantially  the  same,  and  if  it  were  shown  that  the  rates  quoted  from 
Liverpool  were  much  lower  than  the  rates  quoted  from  New  York, 
that  would  be  very  strong  evidence  against  tiie  reasonableness  of  the 
rates  from  New  York,  and  tlie  shipping  board  would  probably  be 
disposed  to  place  as  the  maximum  from  New  York  the  prevailing 
rates  from  Liverpool.  I  would  assume  that  that  would  be  their  line 
of  reasoning  in  a  concrete  case. 

Mr.  Hardy.  As  to  the  question  about  the  power  of  our  shipping 
board  or  of  our  Government:  Have  not  we  the  right,  both  legally  and 
treaty  rights,  to  prescribe  the  conditions  and  terms  on  which  any 
vessel,  either  ours  or  a  foreign  vessel,  provided  we  make  them  the 
same,  may  enter  and  clear  at  our  ports  ? 

Dr.  Johnson.  We  can  go  to  the  extent  of  actual  embargo. 

Mr.  Hardy.  And  so  long  as  we  made  no  distinction  in  favor  of  our 
ships,  is  there  any  treaty  we  would  be  violating  if  we  imposed  like 
conditions  on  both  ships  ? 

Dr.  Johnson.  My  answer  to  Congressman  Curry  a  few  moments  ago 
was  that  I  have  not  examined  our  commercial  treaties  with  this  act  in 
mind,  and  would  prefer  not  to  testify  on  their  relation  to  this  act. 

Mr.  Hadley.  In  view  of  your  testimony,  so  far  as  you  are  advised, 
do  you  not  think  it  is  a  very  material  (question  that  this  board  shoulcl 


26  REtJULATOBV    FEATURES    OF    SHIPPING     lill.L. 

determine  wliether  the  coiuinercial  treaties  were  l)ein<;  iiiii)airecl  or 
contravened  by  this  act  before  attempting  to  pass  it? 

Dr.  JoHXsox.  I  had  assumed  this  committee  in  working  out  a  bill 
had  considered  that  pertinent  question  and  1  have  not  thought  it 
necessary  to  go  into  it  myself. 

The  Chairman.  It  has  been  before  the  country  for  (wo  years  j^ast 
and  nobody  has  even  suggested  it. 

Mr.  Hadley.  I  confess  I  have  not  been  a  M(?m])er  of  Congress  very 
long,  but  the  matter  has  not  been  under  consideration  before  this  com- 
mittee since  I  have  been  a  Member  of  Congress. 

The  CiiAiRMAX.  When  I  say  this  bill  has  been  Ix-fore  the  country, 
I  mean  the  commercial  bodies  in  this  country;  and  that  fj[uestion 
has  never  been  raised,  that  it  would  violate  any  treaties. 

Mr.  Curry.  If  necessary,  this  bill  could  contain  a  section  authoriz- 
ing a  readjustment  of  those  treaties. 

The  Chairman.  Oh,  yes.  I  say  where  there  is  equality  of  treatment 
it  would  not  violate  any  treaty.  If  we  were  to  discriminate  in  favor 
of  American  ships,  then  I  could  readily  understand  why  it  might 
violate  some  of  our  commercial  treaties. 

Mr.  Saunders.  I  think  we  would. 

Mr.  Curry.  I  have  a  concrete  case  that  was  developed  before  this 
committee  some  days  ago.  There  was  a  representative  of  a  steel 
works  from  Birmingham,  Ala.,  before  the  committee  who  stated  they 
were  the  lowest  bidders  in  a  contract  for  delivering  steel  to  some 
place  in  Chile.  The  next  lowest  bidder,  I  believe,  was  a  British  firm. 
But  the  British  firm  got  the  contract  after  a  great  deal  of  backhig 
and  fillmg,  because  the  Birmingham  firm  could  not  get  the  rates, 
they  could  not  get  as  good  rates  from  Alabama,  through  the  canal  to 
Chile,  as  the  British  firm  could,  I  think,  from  Birmingham,  England, 
to  Chile.  That  was  a  clear  case  of  discrimination  in  rates,  wnere  a 
big  contract  amounting  to  several  hundred  thousand  dollars,  if  not 
millions  of  dollare,  was  lost  to  this  country. 

It  seems  to  me,  if  it  is  possible,  that  this  condition  ought  to  be 
rectified.  Wliether  it  can  be  done  or  not  under  int(>rnational  law 
I  do  not  know. 

Dr.  Johnson.  At  least,  you  would  probably  feel  it  might  be  wise 
to  have  some  public  authority  look  into  the  question  to  determine 
whether  there  had  been  an  unfair  discrimination  against  the  American 
exporter  or  not  ? 

Mr.  Curry.  This  bill,  I  think,  will  contain  a  section  creating  a 
shippmg  board  with  authority  to  look  into  those  conditions.  It 
ought  to. 

Mr.  Saunders.  In  that  connection.  Doctor,  I  would  like  to  point 
out  that  that  presents  a  situation  tliat  conceivably  could  not  be 
reached  by  this  board  at  all.  The  English  exporter  mioht  very  well 
have  gotten  better  rates  from  England  to  this  point  in  Chile  than  the 
American  exporter  got  without  having  "jotten  them  as  the  result  of 
an  unfair  discrimination  of  any  particular  line.  If  that  was  so,  of 
course  that  would  present  a  situation  that  under  this  section  could 
not  be  reached. 

Dr.  Johnson.  I  do  not  tliink  Congressman  ('urry  intended  to  sug- 
gest that  the  existence  of  a  shi])})ing  l)()ard  would  necessarily  guar- 
antee to  us  as  many  ships  out  of  American  ports  as  there  are  out  of 


HE(iULATORV    FEATURES    OF    Sllll'l'IXG    BILL.  27 

English  ])orts  and  rates  that  prevail  as  low  from  the  United  States 
as  prevail  from  any  other  country. 

Mr.  Saunders.  No.  I  was  just  calling-  attentioji  to  tho  limitations 
in  that  section.  1  was  trying  to  point  out  tliat  a  situation  which 
would  create  a  hardship,  you  might  say,  on  our  American  exporter 
did  not  necessarily  present  a  situation  that  would  l)e  reached  hy 
this  section.  There  would  have  to  be  some  discrimination  in  there 
on  the  part  of  the  line  going  out  of  our  ports. 

Mr.  Hardy.  It  occurred  to  me  while  we  were  discussing  this  that 
one  of  the  very  functions  of  this  board  would  be  to  make  a  full 
investigation  of  our  rights  and  the  best  possible  means  of  ascertaining 
them  and  correcting  the  evils — that  that  would  be  one  of  its  useful 
functions.  And  along  that  line  there  was  a  proposition  to  insert  a 
paragraph  giving  them  full  power  of  investigation. 

Mr.  Greene.  And  to  hold  up  the  cargo  in  the  meantime? 

The  Chairman.  Oh,  no. 

Mr.  Edmonds.  I  am  glad  Judge  Hardy  is  getting  over  to  my  idea. 
I  said  to  stop  at  section  3  and  then  let  the  board  suggest  the  regula- 
tions.    Now,  the  judge  is  getting  over  my  way. 

Mr.  Hardy.  If  the  gentleman  thmks  we  are  getting  together,  I 
hope  we  are.     I  want  to  do  something  while  we  wait. 

Mr.  Edmonds.  In  the  first  paragraph,  section  4,  I  would  be  glad 
to  have  you  tell  me  what  effect  that  would  have  on  regular  lines  and 
also  on  tramp  steamers. 

Dr.  Johnson.  The  section  to  which  you  refer  provides  that  it 
shall  be  unlawful  for  any  common  carrier  by  water,  or  other  person 
subject  to  the  act,  either  directly  or  indirectly,  to  charge,  demand, 
collect,  or  receive  from  any  persoh  or  persons  by  any  special  rate, 
rebate,  drawback,  or  other  device  a  greater  or  less  compensation  for 
any  service  rendered  or  to  be  rendered  m  the  transportation  of  pas- 
sengers or  property  subject  to  the  provisions  of  this  act  than  it 
charges,  demands,  collects,  or  receives  from  any  other  person  or 
persons  for  doing  for  him  or  them  a  like  service  in  the  transportation  of 
a  like  kmd  of  traffic  under  substantially  similar  circumstances  and 
conditions.     That  is  the  clause  to  which  you  refer? 

Mr.  Edmonds.  That  is  the  clause  to  which  I  refer.  The  balance 
of  it  does  not  affect  it. 

Dr.  Johnson.  To  attack  a  big  question  by  piecemeal  I  would 
suppose  that  it  prohibited  a  rebate  or  a  drawback  on  a  rate.  I  think 
that  would  be  an  absolute  prohibition. 

Mr.  Edmonds.  Yes. 

Dr.  Johnson.  Now,  a  prohibition  also  runs  against  any  special  rate, 
which  is,  of  course,  the  crux  of  the  question  as  far  as  rate  making  is 
concerned  by  line  steamers  and  by  tramp  steamers.  If  a  different 
rate  is  given  to  one  shipper  than  is  given  to  another  for  the  transpor- 
tation of  a  like  kind  of  property,  and  it  is  done  lawfully  after  this 
becomes  a  law,  there  must  be  substantially  dissimiliar  circumstances 
and  conditions  surrounding  the  two  services.  Now,  to  what  extent 
dissimilar  circumstances  and  conditions  prevail  at  the  beginning  of 
the  lading  of  a  vessel  and  at  the  end  of  the  lading  of  a  vessel  that  is 
on  the  berth,  for  instance,  is  a  question  which  I  would  not  like  to 
determine  at  the  present  time.  In  other  words,  a  board  might  pos- 
sibly hold  that  the  owner  of  an  individual  vessel  that  is  on  a  berth 
seeking  cargo  might  ])e  justified  in  making  a  slightly  different  rate 


28  KEGULATORY    FEATURES    OF    SHIPPING   BILL. 

for  two  different  shippers  on  the  same  article,  provi(U>(l  one  shipper 
shi]3s  in  ix  very  hii-ge  quantity  and  another  in  a  small  quantity. 
There  might,  ])ossibly,  to  take  an  extreme  case  which  would, 
perhaps,  be  the  most  difficult  case  to  arise,  be  justifying  circum- 
stances and  conditions  warranting  different  rates  to  different 
shippers  on  the  same  steamer.  I  do  not  say  that  there  would, 
but  there  might  be.  I  doubt  whether  the  canon  reasonableness 
that  would  recjuire  exactly  the  same  rate  for  every  shipper  of 
the  same  kind  of  a  commodity  on  a  tramp  steamer.  The  line 
usually  has  established  rates  on  the  line  vessel.  Any  deviation 
from  that  by  a  line  would  probably  constitute  a  special  rate  coming 
under  the  prohibition  of  the  law.  That  I  would  be  fairly  clear  about. 
But  whether  the  provision  of  the  law  would  impose  absolutely  the 
same  rate  upon  all  shippers  by  a  vessel  upon  the  berth,  I  would 
somewhat  question.  It  would  depend,  I  think,  upon  the  decision 
which  an  intelligent  board  might  reach  after  looking  into  the  ques- 
tion. 

Mr.  Edmonds.  Suppose  I  had  two  steamers  in  Philadelphia  and 
they  were  both  .5,000-ton  boats,  both  owned  by  myself.  I  load  one 
of  those  with  5,000  tons  of  coal  to  go  to  Brazil,  we  will  say.  A  couple 
of  days  after  that  a  man  comes  along,  another  shipper,  and  says, 
' '  I  will  take  that  other  boat  of  yours ;  what  are  you  going  to  do  with 
it."  "I  am  going  to  load  it  with  ballast,"  I  will  say,  "and  send  her 
over  to  Spain:  I  haven't  got  a  cargo  here  for  it,"  or  I  am  going  to 
send  it  somewhere  else.  "Say,  now;  you  look  here;  if  you  will  take 
another  5,000  tons  of  coal  for  Brazil,"  at  a  rate,  we  will  say,  of  25  cents 
a  ton  less  than  I  am  getting  on  the  other  steamer,  "I  can  get  that 
cargo  for  you."  The  natural  supposition  would  be  I  would  take 
that  cargo,  lacking  cargo  for  my  boat.  I  would  then  be  making  a 
special  rate  to  the  second  shipper  for  exactly  the  same  service. 

Dr.  Johnson.  I  am  not  sure  you  would  be  making  that  second 
rate  under  circumstances  and  conditions  exactly  similar  to  those  that 
prevailed  when  you  were  making  the  first  rate. 

Mr.  Edmonds.  Would  not  that  lead  to  a  whole  lot  of  legal  com- 
plications, complaints  before  the  board,  and  hearings  that  would  never 
be  finished;  and  would  not  the  shippers  be  coming  down  here  to 
Washington  time  after  time  and  time  after  time  to  appear  at  these 
hearings  ? 

Dr.  Johnson.  I  do  not  know  how  that  would  work. 

Mr.  Edmonds.  You  know  yourself — you  are  a  member  of  the 
Maritime  Exchange  of  Philadelphia,  and  you  know  exactly  what 
would  ha])pen;  and  so  do  I. 

Dr.  JonxsoN.  I  do  know  that  the  most  troublesome  clause  for- 
merly in  the  interstate  commerce  act  was  the  clause  "under  sidistan- 
tiaUy  similar  circumstances  and  conditions";  and  I  do  know  that  the 
flexibility  of  conditions  of  rate  regulation  in  England  grows  out  of  that 
veiy  phrase  "under  substantially  sinfilar  circumstances  and  condi- 
tions." 

But  in  answer  to  your  first  c{uestion,  I  do  believe  that  that  phrase 
gives  flexibility  enough  to  the  statute  to  obviate  the  necessity  of 
quoting  every  shipper  the  same  rate  for  the  shipment  of  like  kinds  of 
commodities. 

Mr.  Edmonds.  You  would  api)rove  then  of  keeping  that  in  this  bill 
at  the  present  time  ? 


REGULATORY    FEATURES    OF    SlilPPIXti    BILL.  29 

Dr.  Johnson.  I  wouli]  koop  it  in  and  try  it  out  until  I  found  out 
how  the  thing  workcnl.  .Vnd  th{Mi  if  oxjiorience  seemed  to  suggest 
modifications  of  it,  I  would  modify  it. 

Mr.  RowE.  Don't  you  think  that  this  law  as  you  have  it  (h-awn 
here,  at  least  for  the  first  two  or  three  years,  would  work 

Dr.  Johnson.  I  did  not  draw  it. 

Mr,  RowE.  As  it  is  drawn  here — no;  I  know  you  did  not;  pardon 
me — will  work  a  hardship  more  on  our  domestic  ships  sailing  under 
our  American  flag  than  under  foreign  flags;  for  instance,  ship  com- 
panies doing  business  between  the  United  States  and  South  America. 

Dr.  Johnson.  I  know  what  you  mean.  But  on  the  whole,  as  I  said 
in  answer  to  Mr.  Greene's  question  that  was  asked  before  luncheon, 
I  think  that  the  American  steamship  line  and  the  American  ship  in 
the  future  will  have  a  better  opportunity  if  this  act  is  passed  than  it 
will  have  if  it  is  not  passea. 

Mr.  RowE.  That  is  your  belief  under  this  act? 

Dr.  Johnson.  Yes;  that  is.  I  recognize  that  regulation  involves 
more  or  less  limitation  of  action;  that  is  the  essence  of  regulation,  of 
course.  And  from  time  to  time  that  limitation  upon  individual 
action  may  be  a  hindrance  to  the  development  of  the  export  and 
import  business;  but  the  total  effect,  I  think,  of  such  a  measure  as 
this  would  be  to  give  a  fairer  field  and  larger  opportunity  to  the 
American  shipper. 

Mr.  RowE.  Just  one  other  question:  Has  it  not  occurred  to  you  in 
reading  over  and  studying  this  bill  that  the  operator  of  the  tramp 
steamer  will  have  an  advantage  over  the  regular  lines? 

Dr.  Johnson.  Yes;  I  think  he  is  less  restrained  by  the  act  than  the 
regular  lines. 

The  Chairman.  He  is  under  existing  conditions,  is  he  not? 

Dr.  Johnson.  Oh,  yes;  he  has  no  restraint  whatever  now,  does  he? 

Mr.  RowE.  Under  tlie  nev/  conditions  he  would  have  very  much 
less  than  the  regular  lines.  You  can  get  at  the  regular  lines,  in  other 
words,  and  regulate  them;  but  it  is  very  hard  to  regulate  a  tramp. 

Dr.  Johnson.  You  see,  this  law  deals  first  witli  tiie  general  condi- 
tions of  competition  and  second  and  most  specifically  with  conference 
agreements  and  the  lines  that  are  members  of  the  conference.  So  that 
the  law  proceeds  some  distance  in  the  regulation  of  lines  before  tramps 
are  reached  at  all.     Do  I  make  my  point  clear  >. 

Mr.  RowE.  Yes;  I  think  you  do.  Now,  would  tranqis,  in  your  judg- 
ment, come  under  control  like  tramps  started  out  \)\  English  and 
German  lines  combined,  as  they  were  before  the  war,  to  break  up  a 
trade  ? 

Dr.  Johnson.  The  law  proliil:)its  fighting  ships. 

Mr.  RowE.  Fighting  ships,  not  tramps? 

Dr.  Johnson.  It  prohibits  unreasonable  discriminations;  it  pro- 
hibits secret  rebates;  it  prohibits  a  whole  lot  of  things.  And  the  pro- 
hibition runs  just  as  mucli  against  the  foreign-owned  vessels  as  it  is 
against  the  American-owned  vessels. 

Mr.  RowE.  You  know  in  some  of  the  English  l)oats  they  incorporate 
every  boat  of  any  size  into  a  separate  company.  vSuppose  that  follows 
in  the  United  States  as  it  does  in  Englind,  how  are  you  going  to  con- 
trol them  by  your  board  ? 

Dr.  Johnson.  I  (hi  not  see,  ofl'hand,  Mr.  Rowe,  how  incorporation 
affects  the  situation.  The  law  would  reach  the  l)oat  owned  by  indi- 
vidual persons  just  as  much  as  by  a  corporation. 


30  EEGULATORY    FEATURES    OF    SHIPPING   BILL. 

Mr.  RowE.  Yes;  but  then  it  would  only  act  each  time  in  reference 
to  the  individual  boat,  would  it  not 

Dr.  JoHxsox.  Yes;  I  said  that. 

Mr.  RowE.  Instead  of  the  line?  As  long  as  20  boats  are  con- 
trolled by  one  line,  then  you  can  have  your  effect;  but  when  you  get 
down  to  20  different  companies 

Dr.  Johnson.  If  those  20  different  companies  operated  their  ves- 
sels under  a  common  management,  over  a  defuiite  line  with  fixed 
sailings  and  all  that,  it  would  become  a  line  service,  I  would  say,  sub- 
ject to  the  provisions  of  this  act  just  as  much  as  it  would  be  if  there 
were  not  20  different  ownerships.  Of  course,  I  do  not  pretend  to 
speak  on  that  point  after  any  mature  reflection,  because  it  is  a  new 
point  to  me;  but  offhand,  I  do  not  see  that  that  would  affect  the 
situation, 

Mr.  RowE.  But  you  just  said  a  few  minutes  ago — and  that  is  what 
brought  that  idea  out — that  your  decision  would  affect  the  individual 
compan}^  rather  than  affect  the  trade  from  your  port. 

The  Chairman.  No;  he  said  ''as  well." 

Mr.  RowE.  I  understood  him  to  say  it  would  affect  the  individual 
company;  that  the  proceedings  of  the  board  would  be  against  that 
company,  not  against  the  trade  from  that  port  and  other  companies 
trading  from  that  port. 

Dr.  Johnson.  No;  I  was  merely  stating  the  question  of  law.  The 
order  of  a  commission,  as  well  as  of  a  court,  runs  against  the  parties 
in  the  case.  That  is  all  I  meant  by  that  statement.  The  order  that 
may  run  wholly  against  me  would  apply  to  me  and  to  the  act  that  I 
committed.  Congressman  Edmonds  has  not  been  covered  by  that 
order  necessarily,  although  he  would  probably,  in  view  of  the  order 
against  me,  not  do  this  very  same  tiling  I  have  done. 

Mr.  RowE.  In  proceedings  under  this  bill  you  can  bring  in  all  other 
people  carrying  on  the  same  trade,  if  you  wished  ? 

Dr.  Johnson.  Tliey  could  substantially  be  brought  in.  The  order 
would  not  I'un  against  him;  it  would  only  run  against  the  parties 
at  issue  in  the  case. 

Air.  Hardy.  ^Vlong  that  line,  to  begin  with,  my  understanding  of 
the  custom  of  incorporating  the  separate  boats  is  a  sort  of  a  special 
American  practice. 

Mr.  Row^E.  Oh,  no;  it  is  an  English  custom  more  especially.  We 
are  adopting  it  now. 

Mr.  Hardy.  It  is  very  especially  so  here  in  order  to  avoid  liability. 
But  leaving  that  cpiestion  out,  if  it  were  apparent  the  one  manage- 
ment controlled  20  different  l)oats  each  separately  incorporated, 
acting  together,  does  it  not  occm*  to  you  that  it  would  bo  within  the 
province  of  the  court  trying  that  ([uestion  to  hold  that  method  is 
simply  evasive  of  this  law  and  enter  its  order  against'  that  whole 
management  ? 

Dr.  Johnson.  The  line  itself  can  l)e  made  a  party  respondent  and 
it  would  run  against  the  whok;  line. 

Mr.  Hardy.  Including  the  whole  of  the  ships  under  that  control? 

Dr.  Johnson.  I  would  assume  that. 

Mr.  Hardy.  That  is  what  seems  to  me  to  l)e  the  case. 

Dr.  Johnson.  I  perhaps  did  not  understand  your  question. 

Mr.  RowE.  I  am  just  asking  for  information. 

Di'.  Johnson.  I  did  not  understand  your  ciuestion. 


REfiUI.ATORV    FEATURES    OF    SHIPPING    BILL.  31 

Mr.  Hardy,  I  would  like  to  follow  tliat  Idea  out,  because  it  seemed 
to  mo  a  new  oiu^  when  you  suggested  it,  but  it  seems  to  me  if  one 
company  adopted  tli(^  rule  of  incorporating  ships  separately  in  order 
not  to  have  the  ships  excluded  from  our  ports  because  of  the  manner 
in  which  they  were  operating,  the  court  would  investigate  and  go 
into  that  question. 

Mr.  Saunders.  I  would  like  to  ask  two  or  three  questions  along  the 
line  Mr.  Edmonds  was  pureuing  a  moment  ago.  Take  the  case  he 
suggested  of  the  two  tramp  ships  owned  by  one  man;  the  first  ship 
loads  coal  for  a  Soutti  American  port  at  a  certain  rate;  and,  under 
the  conditions  that  he  suggested,  the  second  ship  loads  coal  for  the 
same  port  at  a  lower  rate.  Now,  just  asking  for  your  interpretation 
of  the  law  and  not  what  some  future  board  may  interpret  it  to  mean — ■ 
because  of  course  we  can  not  fix  that — but  looking  at  the  bill  as  you 
see  it,  don't  you  think  there  is  enough  authority  given  in  the  bill — 
you  are  interpreting  it — to  allow  you  to  hold  under  the  conditions 
stated  by  Mr.  Edmonds  those  tw^o  ships  could  be  la\\'fully  allowed 
to  carry  the  coal  at  the  different  rates  suggested  i 

Dr.  Johnson.  That  was  my  answer  or  the  sense  of  it. 

Mr.  Sai'nders.  I  say  would  not  you  interpret  the  bill  as  giving  you 
suflicient  authority  for  that  ruUng  ^ 

Di.  Johnson.  I  was  rather  guarded,  but  that  was  essentially  my 
answer  to  Mr.  Edmonds. 

Mr.  Saunders.  Such  a  ruling  as  that  would  be  in  the  interest  of 
trade  and  commerce,  would  it  not? 

Dr.  Johnson.  Yes,  if  the  courts  upheld  it. 

Mr.  Saunders.  I  mean  now  in  your  judgment,  ilon't  you  think 
that  ruling  would  ])e  in  th.e  interests  of  fair  dealing  and  of  trade  and 
commerce  ( 

Dr.  Johnson.  Oh,  yes.  I  would  not  ))e  disposed  to  put  a  straiglit 
jacket  upon  the  foreign  trade  of  the  United  States. 

Mr.  Saunders.  Then,  as  a  conclusion  from  all  that,  is  it  not  fair 
for  us  to  presume  that  a  board  of  such  a  personnel  as  we  contemplate 
this  board  would  be  would  make  such  a  ruling,  upon  such  a  set  of 
facts  as  I  have  suggested,  as  you  have  indicated  you  would  make? 
In  other  words,  a  ruling  that  would  promote  American  trade  and 
American  interests  (! 

Dr.  Johnson.  I  will  let  the  chairman  answer  that  question,  if 
I  may. 

Mr.  Saunders.  I  think  any  of  us  might  answer  that;  but  don't  you 
think  it  would  be  fair  to  assume  that  such  a  board  as  I  have  indicated 
would  make  such  a  ruling,  and  that  it  would  be  in  conformity  with 
what  you  say  is  the  authority  given  in  the  law  and  would  be  in  con- 
formity, also,  with  what  you  say  would  be  in  the  interest  of  American 
trade  and  American  commerce  ? 

Dr.  Johnson.  I  would  say  any  board  would  be  disposed  to  inter- 
pret the  law  with  a  view  to  promoting  rather  than  hindering  the 
foreign  trade  of  the  United  States. 

Mr.  Saunders.  In  other  words,  trying  to  promote  om"  interests 
rather  than  hampering  and  crippling  them,  since  this  bill  is  ostensibly 
and  actually  designed  to  promote  these  interests,  that  it  would  be 
given  an  interpretation  that  would  carry  it  out  and  give  it  effect 
along  those  lines  ? 

Mr.  Edmonds.  I  would  like  to  say.  Judge  Saunders,  that  if  that 
interpretation  is  correct,  there  would  be  no  difficulty  for  any  tramp 


32  REGULATORY    FEATURES    OF    SHIPPING    BILL, 

to  make  any  rato  wliidi  it  chose  to  make  simply  by  saying  he  can  not 
get  any  commerce  at  the  other  rate. 

^Ii'.  Saunders.  He  can  not  make  a  fictitious  reason.  A  man  can 
not  impose  on  a  tribunal  in  any  such  way  as  that;  you  would  soon  get 
hauled  up  if  you  came  into  court  with  a  fictitious  excuse. 

Mr.  Edmonds.  I  would  like  to  ask  Dr.  Johnson  a  question  on 
another  line.  I  beheve  you  studied  the  Pacific  conditions  pretty 
well  when  you  were  at  Panama,  did  you  not  ? 

Dr.  Johnson.  I  have  made  some  study  of  Panama  matters;  yes. 

Mr.  Edmonds.  The  Japanese  line  is  subsidized  to  about  the  extent 
of  5  per  cent  on  its  capital,  I  believe — the  Ihie  running  to  San  Fran- 
cisco— and  a  Ime  competing  Vvith  it  would  not  be  subsidized.  You 
would  not  be  able  to  make  a  freight  rate  on  the  American  Ime  less 
than  you  would  on  the  Japanese  Ime,  and  the  Japanese  line  can  run 
for  cost  and  still  make  6  per  cent  on  its  capital.  How  is  this  gomg 
to  aid  m  building  up  these  two  competing  lines  by  rate  supervision  'i 

Dr.  Johnson.  I  do  not  think  that  this  bill  would  nmch  change  the 
present  situation.  Of  course,  as  you  say,  the  Japanese  lines  now  are 
subsidized  and  the  American  lines  are  not.  Tliat  is  a  situation  which 
this  bill  does  not  reach  at  all.  I  do  not  know  that  tliose  who  drafted 
the  bill  thought  that  it  would  reach  that  condition.  Does  my  answer 
seem  evasive  ? 

Mr.  Edmonds.  You  said  this  would  build  up  a  merchant  marme, 
and  I  am  trying  to  find  out  how  it  would  do  it. 

Dr.  Johnson.  I  am  not  testifying  here  as  to  what  has  been  claimed 
for  it;  but  my  testimony  this  mornmg  was  that  the  bill  was  framed 
in  accordance  with  right  prmciples.  That  is,  I  made  an  argument 
in  support  of  regulation  and  took  the  position  that  this  bill  was 
drafted  according  to  right  principles.  I  do  not  want  to  be  drawn  into 
this  larger  question  of  how  we  should  aid  the  American  marine, 
because  that  is  not  really  before  the  committee,  as  I  understand,  at 
the  present  time. 

Mr.  Edmonds.  Yes;  but  you  made  the  statement  a  few  minutes 
ago,  since  I  have  been  here,  that  you  thought  if  this  was  put  mto 
operation,  it  would  build  up  our  merchant  marine.  I  am  trying  to 
find  out  how  it  would. 

Dr.  Johnson.  No;  I  think  the  conditions  won  Id  ])e  better  with  it 
than  they  would  if  it  were  not  enacted;  that  is  what  I  intended  to  say. 

Mr.  Edmonds,  It  may  be  you  said  that.  I  thought  your  answer 
to  Mr.  Curry's  question  was  that  this  was  going  to  make  a  })etter 
condition  of  affairs  for  the  American  merchant  marine. 

Dr.  Johnson.  Yes;  that  is  what  I  inten(hHl  to  say. 

Mr.  Hadley.  lender  the  terms  of  this  bill  as  you  have  interpreted 
it,  I  would  like  to  know  how  an  American  line  out  of  Seattle  or  Puget 
Sound  ports  is  going  to  undertake  to  compete  from  Hongkong  witli 
a  British  line  from  Hongkong  to  \^ancouver,  British  (\)hrnd)ia,  meet- 
ing the  railroad  terminals^ 

Dr.  Johnson.  That  again  is  a  situation,  as  I  said  just  now  to 
Mr.  Edmonds,  that  is  reached  by  this  bill,  is  it  not? 

Mr.  Hadley.  I  ask  you  if  you  interpret  this  that  the  American 
line  is  to  be  subject  to  the  regulation  of  this  boar(h 

Mr.  Johnson.  It  should  be  subject. 

Mr.  Hadley.  If  we  can  reach  out  and  i-egulate  the  British  line 
that  does  not  touch  our  ports  at  all,  all  right;  but  I  understood  y(m 


KEGULATORY    FEATUKEti    OF    SHIPPING    I'.ll.l..  33 

to  concede  and  everybody  to  concede  that  it  can  not  be  done.  Now, 
that  hne  conies  into  direct  competition  witli  us  because  the  moment 
it  strikes  the  American  seaboard  at  Vancouver,  the  terminal  of  the 
Canadian  line,  of  course  it  has  immediate  access  through  our  porta 
by  rail  and  there  would  be  no  way  on  earth  of  controlling  it. 
I  am  getting  at  the  condition  we  would  be  in  on  the  Pacific  coast 
under  the  operation  of  this  bill. 

Dr.  Johnson.  Would  not  the  scope  of  that  competition  affect  any 
decision  as  to  reasonableness  of  the  rates  from  Seattle?  The  ques- 
tion that  would  arise  would  be  as  to  the  reasonableness  of  tlie  rate 
from  Seattle  to  Yokohama,  we  will  say,  and  if  the  reasonableness  of 
the  rate  was  questioned,  would  not  any  board  in  determining  the 
question  before  it  take  into  consideration  all  of  the  conditions  of 
competition  which  had  to  be  met  in  the  making  of  that  rate?  la 
that  not  so  ( 

Mr.  Hadley.  J  am  askmg  your  view  of  it.  I  can  see  that  there  is 
force  ill  that  and  that  there  are  other  lines  that  will  compete  with  the 
Puget  Sound  line  I  referred  to,  and  there  will  be  complications  between 
those  lines;  and  when  you  come  to  regulate  between  a  foreign  line  and 
an  American  line  at  any  Puget  Sound  ports  you  have  also  to  take  into 
consideration  other  circumstances,  such  as  competition  between  Amer- 
ican lilies;  and  if  one  line  can  not  make  any  discrimination  at  all  as 
against  another  one,  then  I  do  not  see  how  you  can  take  advantage  of 
the  similar  ckcumstances  and  conditions  under  this  bill,  with  the 
British  or  foreign  line  competing  in  a  British  port  and  thence  raihoad 
into  our  country  tlie  products  of  foreign  countries. 

Dr.  Johnson.  The  Interstate  Commerce  Commission  in  many  cases 
has  justified  lower  rates  for  services  performed  under  exacting  condi- 
tions of  competition  than  it  justified  for  another  service  without  those 
conditions  of  competi^.ion.  And  I  would  think  that  that  broad  prin- 
ci])le  would  apply  in  ])assiiig  upon  the  reasonableness  of  the  rate  from 
Seattle.  It  might  be  that  Seattle  because  of  its  location,  close  to  the 
Canadian  border,  would  be  entitled  to  a  lower  trans-Pacific  rate  than 
San  Francisco. 

Mr.  Edmonds.  It  is  the  same  as  the  AUan  Line  steamers  from  Mon- 
treal and  Nova  Scotia  to  England. 

Ml'.  CuKKY.  I  would  like  to  know  what  would  happen  to  San  Fran- 
cisco then? 

Mr.  Hadley.  That  is  what  I  had  in  mind  in  asking  the  question; 
and  while  this  may  seem  to  be  afield,  I  do  not  think  it  is  at  aU.  I 
think  it  is  immediately  in  point.  I  simply  want  to  get  your  view, 
I  have  not  a  well  thought-out  view  of  this  myself.  It  is  a  matter  of 
new  consideration  and  I  want  your  view  while  you  are  here,  and  then 
I  will  give  it  my  own  consideration. 

Dr.  Johnson.  I  do  not  think  regulation  means  a  level  rate  among 
all  Pacific  ports  on  export  traffic  nor  level  rates  on  export  traffic  to 
Europe  from  all  the  several  Atlantic  ports.  The  reasonableness  of  the 
rate  is  determined  by  all  the  conditions  which  surround  the  service 
and  the  rate. 

Mr.  Curry.  Would  not  the  reasonableness  of  the  rate  apply  only 
to  a  single  ship  that  was  carrying  the  goods,  or  would  it  apply  to  a 
line  or  to  a  class  of  ships  ? 

38534—16 3 


34  REGULATORY    FEATURES    OF    SHIPPING   BILL. 

Dr.  Johnson.  I  think  under  this  act  that  any  one  of  those  questions 
could  be  brought  forward  on  complaint;  that  is,  a  rate  on  the  specific 
article,  a  rate  on  the  particular  vessel,  or  a  particular  schedule  of  Une 
rates.  I  think  they  coidd  all  be  subject  to  investigation  and  deter- 
mination under  this  act. 

Mr.  Curry.  I  am  interested  in  knowing  who  would  have  the  right 
to  make  a  complaint.  Would  any  one  except  a  party  at  interest, 
such  as  the  shipowners,  the  shippers  or  the  importers  ? 

Dr.  Johnson.  The  bill  is  indefinite  there.  It  does  not  state  who 
may  be  complainant.     Perhaps  that  is  a  point  to  be  considered. 

Mr.  Curry.  Of  course  the  ship  ought  not  to  be  subject  to  bo  held 
up  and  tied  up  by  a  trouble  maker  who  has  no  financial  interest, 
directly  or  indirectly. 

Dr.  Johnson.  As  I  read  the  bill,  there  is  nothing  in  the  bill  which 
states  who  may  enter  a  complaint. 

Mr.  Greene.  The  point  you  seem  to  make — I  do  not  know  that  I 
am  correct  on  it — is  this:  You  talk  about  the  reasonableness  of  a  rate, 
as  to  whether  it  is  too  low  or  too  high.  An  American  owning  a  ship 
getting  no  assistance  from  the  Government  and  coming  in  competi- 
tion with  others  that  have  assistance  from  their  Government,  could 
not  afford  to  make  a  very  low  rate  unless  he  ran  his  business  for 
nothing  or  nm  his  vessel  at  a  loss.  He  could  not  afford  to  name  a 
lower  rate  and  continue  in  business;  he  would  have  to  name  a  higher 
rate.  He  would  be  discriminated  against  by  reason  of  somebody  else, 
some  foreign  line,  runnirg  near  Seattle  or  in  that  region — Puget 
Sound — by  those  vessels  which  are  subsidized,  like  the  Japanese  or 
the  English  Government,  or  a  preferential  rate  of  the  English  Govern- 
ment, running  also  the  Canadian  Pacific  Line.  It  seems  to  me  he  is 
at  a  direct  disadvantage  under  this  bill  by  being  regulated  by  the 
United  States;  it  seems  to  me  clear  he  would  be  at  a  disadvantage. 

Dr.  Johnson.  Let  me  suggest,  Mr.  Greene,  that  discriminations 
are  of  two  kinds,  reasonable  and  unreasonable.  A  discrimination  of 
itself  is  not  necessarily  an  unlawful  act.  If  a  carrier  charges  a  higher 
rate,  an  American  carrier,  than  a  Japanese  competitor  charges,  and 
can  show  that  his  costs  of  service  are  higher,  can  show  that  the 
Japanese  Line  receives  a  subsidy  and  he  does  not,  he  may  be  able  to 
justify  locally  a  higher  rate;  that  is,  he  may  justify  a  lau^ul  discrimi- 
nation. 

Mr.  Greene.  Oh,  I  do  not  question  but  what  he  can  justify  it,  but 
my  (question  is  he  would  not  get  the  business;  he  woidd  be  starved  to 
death. 

The  Chairman.  Tliat  would  not  be  the  fault  of  this  law,  but  be- 
cause the  other  fellow  performs  the  same  service  for  less  money. 

Mr.  Greene.  No,  it  is  because  we  do  not  make  any  provision  for 
him  to  give  the  man  a  chance  to  compete;  you  have  the  law  so  tight 
the  man  can  not  get  any  chance  to  compete.  If  you  put  a  subsidy  in 
your  bill,  then  you  will  have  something  to  do  it  with.  That  is  really 
what  ought  to  go  into  the  bill. 

The  Chairman.  I  want  to  say  to  you.  Brother  Greene,  it  may 
possibly  be  that  ultimately  we  wiU  have  that  to  do. 

Mr.  Greene.  But  I  do  not  want  you  to  strangle  every  shipper 
before  that  is  done. 

The  Chairman.  I  do  not  want  anything  like  that  unless  we  have 
this  law  on  the  statute  books  first. 


REGULATORY   FEATURES   OF    SHIPPING   BILL.  35 

Mr.  Greene,  I  want  to  keep  this  law  oft",  because  I  think  it  would 
strangle  them  to  start  with. 

The  Chairman.  Oh,  yes;  you  would  like  to  subsidize  the  lines  and 
give  them  a  free  hand  to  exploit  the  trade.  I  do  not  want  to  do 
that.     I  want  to  regulate  them  first. 

Mr.  Greene.  I  want  to  regulate  them. 

The  Chairman.  I  have  some  regard  for  the  consumer. 

Mr.  Greene.  I  have,  too. 

Mr.  Saunders.  You  have  read  this  bill  with  reference  to  the  proposed 
control  over  the  interstate  water  carriers.  Does  it  occur  to  you  that 
there  is  anything  in  the  provisions  of  the  bill  that  is  intended  unrea- 
sonably to  oppress  or  harass  that  traffic  ? 

Dr.  Johnson.  No;  I  do  not  see  anything  in  the  bill  that  will  put 
any  handicap  upon  the  commerce  by  water  in  interstate  traffic, 

Mr.  Saunders.  I  believe  rate  regulation  of  the  railroads  through 
the  medium  of  the  Interstate  Commerce  Commission  is  fully  justified 
to-day  by  pubhc  opinion,  is  it  not?     Can  we  not  say  that  that  is  so ? 

Dr.  Johnson.  I  believe  so.  I  would  like  to  make  just  a  brief  state- 
ment in  this  connection 

Mr.  Saunders.  I  just  want  to  finish  out  what  I  was  going  to  say, 
that  if  there  is  any  sufficient  reason  justifying  the  regulation  of  rates 
of  the  railroads  by  the  Interstate  Commerce  Commission,  is  there  any 
objection  to  conferring  upon  some  like  tribunal  a  control  and  juris- 
diction over  the  water-borne  traffic  in  interstate  traffic  ? 

Dr.  Johnson.  In  general  answer  to  that  question,  I  think  the 
interstate-commerce  act  has  justified  itself,  and  I  do  not  think  that 
even  the  carriers  themselves  would  care  to  go  back  to  the  conditions 
of  1887. 

Mr.  Saunders.  That  is  what  1  was  seeking  to  develop. 

Mr.  Greene.  Is  there  not  a  vast  difference  between  water  and 
land  transportation  ? 

Dr.  Johnson.  I  was  just  going  to  make  a  brief  statement  in  this 
connection.  I  do  not  think  it  would  have  been  wise  for  this  com- 
mittee to  have  subjected  the  carriers  by  water  to  the  same  kind  of 
regulation  to  which  we  now  subject  carriers  by  rail;  and  the  bill,  if 
it  proposed  to  subject  carriers  by  water  to  the  same  kind  of  regulation 
that  the  railroads  are  now  subjected  to,  would  not  meet  with  my 
approval.  But  what  is  proposed  is  something  very  different.  The 
carrier  by  rail  must  publish  and  file  every  rate  he  charges  on  inter- 
state traffic  with  the  Interstate  Commerce  Commission;  and  in  prac- 
tically every  State  he  must  file  with  the  State  authority  his  intrastate 
rates.  He  can  not  charge  any  other  rates;  he  can  not  change  them 
except  upon  30  days'  notice.  The  rates  are  established  by  law, 
practically. 

I  do  not  think  it  would  be  practicable  to  conduct  the  water  trans- 

{)ortation,  ocean  transportation,  under  such  restrictions.  This  bill 
eaves  it  to  the  steamship  line  to  work  out  its  rates,  which  it  does 
not  have  to  print,  even  if  it  does  not  choose  to ;  certainly  it  does  not 
have  to  file  them.  The  owner  of  a  vessel  seeking  traffic  makes  such 
rates  as  he  feels  that  he  can  afford.  There  is  no  requirement  that  he 
has  to  notify  anybody  about  it,  except  the  part}'^  who  is  interested  in 
it.  The  only  rates  that  are  required  to  be  filed  are  those  applying  on 
a  joint  shipment  over  two  or  more  connecting  water  lines.  With  that 
freedom  of  rate  making  and  the  ability  to  change  the  rates  hourly, 


36  REGULATOKV    FEATURES    OF    SHIPPING    BILL. 

if  necessary,  subject  only  to  very  broad  requirements  that  the  ratt^s 
shall  conform  to  the  standard  of  reasonableness  set  down  in  the  act, 
I  believe  it  is  possible  for  the  ocean  carrier  to  go  ahead  and  conduct 
the  business  without  the  degree  of  limitation  that  would  be  really 
restrictive  in  a  business  sense. 

That  was  the  general  statement  1  wanted  to  make. 

Mr.  Saunders.  My  question,  which  you  have  answered,  was  deal- 
ing solely  with  the  authority  proposed  to  be  conferred  by  this  bill 
upon  the  board.  There  was  nothing  in  my  question  that  suggested 
that  we  should  give  to  this  board  the  same  authority  over  interstate 
water  traffic  as  is  given  to  the  Interstate  Commerce  Commission  over 
railroad  rates.  I  asked,  in  substance,  having  in  mind  that  that 
commission  had  justified  itself,  if  there  was  any  reason  why  we 
should  not  give  such  a  control  as  was  contemplated  in  this  bill  to  a 
like  tribunal  or  board. 

Dr.  Johnson.  My  answer  to  that  is  that  there  is  no  reason  as  I 
stated  this  morning.  Tlie  business  of  transportation  upon  the  ocean 
is  a  busniess  of  a  pubfic  nature.  It  ought  not  to  be  conducted 
secretly;  it  ought  to  be  conducted  under  conditions  known  to  the 
Government  and  under  conditions  that  enable  the  Government  to 
correct  unfair  practices.  In  other  words,  it  is  not  a  purely  private 
business:  it  is  a  business  of  a  public  nature  that  ought  to  be  sub- 
jected to  that  degree  of  publicity  and  Government  regulation  that 
corresponds  with  the  nature  of  the  business. 

Mr.  Saunders.  And  I  believe  you  assented  to  the  proposition  that 
there  is  nothing  in  this  bill,  so  far  as  you  have  examined  in  the  pow- 
ers given  to  this  board  over  the  present  interstate  commerce  water 
carriers  that  is  calculated  to  oppress  or  depress  or  in  a  general  way 
to  operate  prejuditially  against  the  business  of  such  carriers. 

Dr.  Johnson.  I  do  not  think  so. 

Mr.  Saunders.  If  there  is,  we  would  like  to  have  you  point  it  out. 

Dr.  Johnson.  I  do  not  think  so.  Judge  Saunders. 

Mr.  Hadley.  In  the  statement  this  morning,  if  I  remember  your 
analysis  of  the  biU — I  did  not  hear  all  of  the  statement — in  the  do- 
mestic trade  the  board,  under  its  corrective  power  would  have  the 
power  and  authority  to  fix  a  rate  irrespective  of  any  maximum 
would  it  not  in  the  coastwise  trade  ? 

Dr.  Johnson.  Perhaps  I  do  not  understand  you.  It  has  the 
power  to  fix  the  maximum  rate. 

Mr.  Hadley.  I  thought  that  was  in  the  case  of  the  foreign  trade. 

Dr.  Johnson.  That  applies  to  both  kinds. 

Mr.  Hadley.  It  does?  There  is  a  limitation  iipon  the  domestic 
trade  that  does  not  exist  in  the  foreign  trade,  if  1  understand  your 
analysis  this  morning.  I  would  like  to  have  you  restate  that, 
because  I  am  not  sure  I  got  your  idea. 

Dr.  Johnson.  The  additional  limitation  upon  domestic  commerce, 
that  is,  carriers  by  water — in  interstate  commerce— is  that  they  shall 
file  with  the  boa-d  and  keep  open  to  public  inspection  the  rates  be- 
tween points  on  their  own  route  and  points  on  a  connecting  route  of  a 
carrier  by  water. 

Mr.  Hardy.  What  line  is  that  you  are  reading  from  ? 

Dr.  Johnson.  Lines  5  to  12,  page  11. 

Mr.  Curry.  But  in  that  case  there  would  practically  be  a  fixing  of 
rates  where  there  are  two  boat  lines  that  perform  a  service;  because 


REGULATORY   FEATURES   OF    SHIPPING   BILL.  37 

if  they  do  not  tile  thair  joint  rates,  each  separate  company  has  got  to 
tile  its  rates,  according  to  line  13. 

Dr.  Johnson.  It  might  work  out  that  way.  I  assume  that  the 
purpose  of  those  who  drafted  that  part  of  the  bill  must  have  been  to 
guarantee  to  the  shipper  a  through  sei'vice  and  a  through  rate  with 
the  accompanying  bills  of  lading,  so  that  a  man  who  wants  to  ship  to 
a  distant  point  wiiich  he  can  reach  by  two  connecting  water  lines, 
can  compel  those  two  connecting  lines  to  take  that  through  traffic 
and  to  give  him  a  through  bill  of  lading.  If  the  boat  lines  do 
not  establish  a  joint  route,  the  board  can  establish  a  joint  route, 
but  they  need  not  establish  a  joint  rate.  Th3  board  can  require 
the  carriers  to  file  with  it  the  rates  that  they  severally  charge,  their 
two  local  rates,  and  of  course  the  board  can  pass  upon  the  reason- 
ableness of  those  two  local  rates.  It  was  found  necessary  in  the  his- 
tory of  the  interstate  commerce  act  to  grant  authority  to  the  Inter- 
state Commerce  Commission  to  establish  through  routes  and  through 
rates  in  order  to  secure  to  the  shippers  the  through  service  which  the 
traffic  required.  That  was  provided  by  the  act  of  1906,  the  Hepburn 
act,  as  regards  tlii'ough  routes  by  rail ;  and  by  section  1 1  of  the  Panama 
act  of  August  24,  1912,  which  gives  the  commission  the  power  to  es- 
tablish a  through  route  by  rail  and  a  connecting  water  line  and  also 
gives  the  commission  the  power  to  order  a  physical  connection  be- 
tween the  rail  and  the  water  carriers.  I  am  inclined  to  think  if  I  had 
been  drafting  the  particular  section  we  now  have  under  consideration, 
that  I  would  have  put  in  a  little  more  and  have  required  the  initial 
carrier  to  provide  through  billing. 

Mr.  RowE.  Instead  of  compelling  the  separate  companies  to  file 
rates  ? 

Dr.  Johnson.  I  would  not  have  disturbed  that;  I  think  that  is 
logical. 

Mr.  RowE.  That  in  most  cases  would  make  known  to  everybody 
the  rates.  For  instance,  the  boat  line  on  the  Eric  Canal  bringing 
goods  down  to  New  York  and  transferring  to  the  ship  line  to  Savan- 
nah, Ga. 

Dr.  Johnson.  Yes. 

Mr.  RowE.  Both  companies,  in  case  they  did  not  file  a  joint  rate, 
would  have  to  file  their  rates  for  that  transportation  ? 

Dr.  Johnson.  Yes.     Is  there  any  objection  to  that? 

Mr.  RowE.  I  thought  you  said  the  theory  of  this  bill  was  not  to  fix 
rates;  not  to  make  them  absolute. 

Dr.  Johnson.  Even  in  that  case  the  requirement  is  that  those  who 
fix  the  rates  shall  file  them;  that  is,  the  companies  who  make. the  rates 
shall  file  them  with  the  board. 

The  Chairman.  It  does  not  say  that  the  board  shall  fix  the  rates 
for  them;  they  fix  them  themselves. 

Ml'.  RowE.  It  does,  if  they  do  not  do  it.  These  several  carriers  in 
such  through  routes  shall  file  the  separately  established  rates.  Now, 
in  that  case,  you  can  order  them  to  file  the  rates. 

Mr.  Curry.  That  is  the  same  as  the  Interstate  Commerce  Commis- 
sion, and  yet  pi-actically  the  Interstate  Commerce  Commission  fixes 
the  rates. 

Mr.  Hadley.  There  is  a  section  in  this  bill  that  provides  for  the 
correction  of  rates  where  there  is  discrimination.  a,7id  that  amounts 
to  the  fixing  of  rates  indirectly. 


38  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

Dr.  Johnson.  Yos. 

Mr.  Hadley.  That  is  a  distinction  without  a  difference.  Tliey  fix 
t\e.  rates  upon  a  comphiint  and  correction — the  authority  exists  to  fix 
a  rate.  It  does  not  matter  wnether  they  fix  the  rate  in  the  first 
instance  or  fix  it  by  correction. 

The  Chairman.  Are  you  in  favor  of  discriminations? 

Mr.  Hadley.  No. 

The  Chairman.  Then,  this  would  result  in  a  remedy  by  having 
the  board  fix  the  rates. 

Mr.  Hadley.  I  am  not  discussing  the  merits  of  the  question. 

Mr.  RowE.  We  are  trying  to  get  at  what  the  effect  will  be. 

The  Chairman.  If  the  effect  is  to  avoid  discrimination  and  the 
rate  is  a  reasonable  one,  I  suppose  everybody  would  be  happy. 

Mr.  Hadley.  I  am  in  favor  of  preventing  discriminations  if  it  is 
bad  and  would  strangle  anybody,  but  that  is  another  question. 

Dr.  Johnson.  May  I  add  to  the  answer  I  gave  a  moment  ago  ?  It 
seems  to  me  there  is,  in  effect,  a  very  substantial  difference  between 
the  power  to  revise  and  the  power  to  prescribe.  If  you  leave  to  the 
carrier  the  initiation  of  rates  and  vest  in  the  public  authority  the 
power  only  to  correct  such  particular  rates  as  are  found,  upon  com- 
plaint and  investigation,  to  be  erroneous,  it  seems  to  me  5^ou  are 
giving  the  Government  a  very  much  narrower  range  of  powers  than 
you  are  if  you  give  them  the  power  of  prescribing  rates  generally. 

Mr.  Hadley.  It  has  not  the  initial  power,  but  simply  depends 
upon  the  initiation  of  somebody  else. 

Dr.  Johnson.  Under  this  bill  the  carrier  not  only  has  the  power 
to  make  the  rate,  but  it  does  not  have  to  publish  or  file  it.  The 
Government  comes  into  the  matter  only  when  a  particular  rate  is 
complained  of  or  when  the  Government  discovers  an  unreasonable 
practice  through  investigation  which  it  initiates. 

Mr.  Curry.  The  interstate  water  commerce  of  California  is  super- 
vised by  the  public  service  commission  out  there,  and  it  works  very 
well. 

Mr.  Edmoxds.  1  do  not  find  much  fault  with  the  interstate  com- 
merce.    It  is  easier  to  handle  interstate  commerce. 

Mr.  IIardy.  I  do  not  know  that  I  undorst;  nd  you,  hut  it  soems  to 
me  section  6  does  require  intcrstat(5  commerce  water  carriers  to  iile 
their  mtcs. 

;Mr.  Kowe.  That  is  the  very  one  we  are  talking  about,  on  page  11. 

Mr.  Hardy.  Yes;  page  11.  from  line  5  down' — every  common  cir- 
rier  by  w-itcr  in  interstate  commerce  sh-!  11  file  with  the  board;  that  is, 
in  tho  interstate  (ommcrce.     I  ]>e]haps  <lid  not  underst'Mid  3^ou. 

Dr.  Johnson.  I  h;;vo  wrcithMl  with  that  ;?  long  time,  Judge  Hardy; 
but  if  you  will  go  to  line  '.)  you  will  find  that  it  s-iys,  referring  to  rates: 
"  between  dilierent  ])oints  on  its  own  route  and  points  on  the  route  of 
any  other  carrier  l)y  w.itei."  It  is  between  points  and  pohits — 
points  (m  one  route  and  ])oints  on  a  connecting  water  carrier.  So  it 
IS  interline  trafiTic. 

Mr.  Hardy.  I  thii\k  3'our  interpretation' — it  is  at  least  diiterent 
from  mine.  I  think  that  means  it  sIimU  not  only  file  its  rates  between 
])oints  on  its  own  n)ute,  but  ;'lso  its  rat(>s  between  ]>oints  on  its  own 
route  ;«nd  ])oints  on  the  other  line. 

Dr.  Johnson.  Xo;  I  do  not  so  r»^"(l  it. 


REGULATORY    FEATURES    OF    SHIPPING    BlLl  .  39 

Mr.  Hardy.  If  you  will  gt)  down  tlurc  to  the  lower  p.irt  of  it,  you 
will  iiml  "  no  iiu  ref.se  shall  be  mr<le  by  sueh  eurrier  in  the  rates,  fares, 
find  chnro'es,  or  joint  rates,  fares,  and  charges  whieh  have  been  filed." 
So  that  it  f'les  its  rates,  fs  res,  and  dir.r^'eson  its  own  lines,  as  well  as 
joint  riites,  fares,  and  chiirges. 

Dr.  Johnson.  No;  but  you  sto])  in  line  17  with  the  word  ''iilcd, " 
whirh  word  is  modi'ied  by  the  following;  phr.-  se:  "  in  conijditince  with 
the  requirements  of  this  section." 

Mr.  Hardy.  Certainly. 

Dr.  Johnson.  And  as  I  read  this  section,  or  this  para<?ra])h  in  this 
section,  the  rates  in  question  are  interbne  rates  between  points  on  one 
route  and  points  on  a  connecting  route,  both  water  routes. 

Mr.  Hardy.  It  seems  to  me  reading  from  line  5,  tliat  that  is  the 
intention  of  the  conmiittee,  to  recpiire  tliese  water  carriers  in  inter- 
state commerce  to  file  their  rates,  cliarges,  and  fares,  and  also  where 
they  have  a  joint  rate  to  file  that.  And  then  if  they  want  to  increase 
those  rates  and  fares,  even  on  their  individual  lines,  or.  their  joint 
rates,  it  does  not  take  effect  until  approved. 

Mr.  Burke.  I  think  if  you  will  turn  to  line  11,  the  words  "if  no 
joint  rate  over  the  through  route  has  been  established"  prove  that 
the  words  "from  different  points  on  its  own  route"  mean  there 
might  be  a  half  a  dozen  points  from  which  it  would  ship  over  a 
through  route  onto  another.  That  clearly  proves  that  they  are  not 
recjuired  to  file  their  rates  from  one  point  on  their  own  line  to  another 
point  on  their  own  line — diflerent  points  in  their  own  line.  There 
may  be  a  dozen  different  shipping  points  on  a  railway,  and  a  dozen 
different  shipping  points  on  the  connecting  line.  I  think  if  you  put 
the  two  phrases  together,  it  means  just  what  the  professor  says. 

Mr.  Saunders.  Section  13  applies  to  separate  rates,  etc.,  applied 
to  through  transportation. 

Mr.  Burke.  Yes;  take  the  two  in  connection. 

Mr.  Saunders.  I  think  Prof.  Johnson's  interpretation  of  that  is 
right. 

The  Chairman.  Is  there  anything  else  from  Dr.  Johnson  ? 

Mr.  Curry.  I  have  just  one  question  more  I  would  like  to  ask  in 
this  connection,  so  as  to  have  it  complete.  I  do  not  know  whether 
this  bill  would  stop  the  different  lines  from  dividing  a  territory 
among  themselves.  If  it  does  not,  it  ought  to.  There  is  a  custom 
in  some  of  the  interstate  commerce  waterways  of  the  United  States 
of  two  to  three  companies  dividing  u])  a  territory  among  themselves. 
For  instance,  we  will  say  there  are  three  lines  running  from  St.  Louis 
to  Xew  Orleans;  those  three  linos  will  divide  up  the  territory — this 
line  wiU  stop  at  a  number  of  towns;  the  other  line  will  stop  at  a  num- 
ber of  towns;  and  the  other  line  will  stop  at  a  numebr  of  towns — or 
they  will  divide  up  the  liver  into  throe  separate  sections.  That 
would  result,  of  course,  in  the  shippers  not  receiving  the  service  they 
should  from  the  three  lines,  but  a  discriminatory  service.  Would 
this  bill  give  the  board  the  right  to  interfere,  and  to  adjust  and 
rectify  those  conditions? 

Dr.  Johnson.  I  think  it  would.  Congressman  Curry.  Beginning 
at  the  bottom  of  page  5  and  continuing  upon  page  6,  are  provisions 
which  give  the  board  power  to  order  canceled  or  modified  any  agree- 
ment,   understanding,    conference,    or    arrangement,    or    any    part 


40  EEGULATOEY   FEATURES   OF   SHIPPING   BILL. 

thereof,  that  it  may  find  discriminatino-  or  unfair,  as  between  car- 
riers, shippers,  exporters,  importers,  or  ports,  or  between  exporters 
from  the  United  States  and  their  foreign  competitors,  or  that  it  may 
find  to  operate  to  the  detriment  of  the  commerce  of  the  United 
States,  or  that  may  be  in  violation  of  the  act;  and  all  such  agree- 
ments, understandings,  conferences,  and  arrangements  shall  be  ap- 
proved or  disapproved  by  the  board,  and  when  approved  shall  be 
excepted  from  the  provisions  af  the  act  of  Congress  of  July  2.  1890. 

Mr.  Curry.  That  would  apply  to  service  as  well  as  to  rates  ? 

Mr.  RowE.  Yes;  the  board  could  even  tell  the  carriers,  I  should 
think,  what  ports  they  would  have  to  stop  at. 

Dr.  Johnson.  The  language  is  very  broad.  It  gives  the  board  the 
power  to  determine  what  is  and  what  is  not  in  accordance  with  the 
public  weal  in  those  agreements.  It  is  a  very  broad  power  and  wisely 
so,  because  those  argeements,  when  approved,  arc  by  the  following 
language  of  the  act  taken  out  from  under  the  antitrust  law. 

Mr.  Edmonds.  To  return  to  my  two  ships,  Dr.  Johnson,  where  I 
ovnied  two  ships  and  I  made  a  different  rate  on  coal  from  Philadel- 
phia to  Brazil  on  two  different  ships.  At  the  end  of  the  page  there, 
line  24,  page  7,  it  says,  ''to  make  or  give  any  undue  or  unreason- 
able preference  or  advantage  to  any  particular  person."  What 
would  be  the  effect  on  me  if  I  did  that  ? 

Dr.  Johnson.  If  you  did  it,  and  you  were  complained  of,  you 
would  have  to  show  that  the  preference  which  you  granted  was  due 
and  reasonable;  and  if  you  could  not  do  it,  why,  of  course,  you  would 
pay  the  fine. 

Mr.  RowE.  You  would  pay  tlie  fine  mentioned  over  here  in  the 
back. 

Dr.  Johnson.  But  the  very  fact  that  you  granted  a  preference 
would  not  incriminate  you;  it  would,  however,  be  incumbent  upon 
you  to  show  that  it  was  a  due  and  reasonable  prelorence. 

Mr.  Edmonds.  I  want  to  ask  the  doctor  one  other  thing,  and  that 
is  this:  If  you  fine  a  foreign  captain  under  this  provision,  you  make 
him  liable  to  imprisonment.     Is  that  a  good  thing  ? 

Dr.  Johnson.  If  I  were  judge,  I  would  fine  him;  I  would  not  work 
the  im]:)risonment  clause  against  him. 

Mr.  Edmonds.  I  am  simply  assuming  in  the  case  of  the  American 
ship,  you  would  eitlier  take  the  captain  up  and  fine  him  or  imprison 
him.  Now  you  have  a  Japanese  steamer  which  has  done  exactly  the 
same  thing.  He  comes  into  your  port.  You  can  take  away  his 
license,  if  there  is  such  a  thing,  or  bar  him  from  the  port,  and  fine  liim 
$500  for  breaking  your  rules.  That  is  true.  But  when  you  come  to 
imprison  a  captain  of  one  of  those  foreigi\  ships,  somebody  is  going  to 
say  something. 

Dr.  Johnson.  Yes ;  it  would  j^robably  raise  (UjJomatic  negotiations ; 
but  any  foreigner  doing  business  in  this  country  has  to  do  it  under 
American  law  the  same  as  anybody  else,  of  course. 

Mr.  Edmonds.  I  know,  but  should  such  an  offense  of  tliat  kind  be 
an  imprisonable  offense  ?     It  is  not  a  criminal  offense. 

Dr.  Johnson.  It  is  made  so  by  this  statute. 

Mr.  Edmonds.  Should  it  be  made  so,  in  your  opinion  ? 

Dr.  Johnson.  Person  ally,  I  do  not  believe  that  tlie  imprisonment 
feature  is  desirable.  Let  me  give  the  reason  which  impels  me  to 
think  that  imprisonment  is  not  a  good  penalty.     If  the  penalty  be 


REGULATORY    I'EATURES    OF    SHIPPING    BILL.  41 

severe,  leading  to  imprisonment,  those  who  have  knowledge  of  the 
violation  of  the  law  will  be  slow  to  complain  and  endanger  the  per- 
sonal freedom  of  those  who  have  violated  the  law.  You  will  find,  of 
course  as  you  know,  in  the  enforcement  of  the  interstate  commerce 
act  and  in  the  enforcement  of  the  Sherman  Act,  the  imprisoimient 
penalty  has  not  actually  been  imposed.  I  beUeve  it  was  in  one  in- 
stance, but  I  do  not  know  that  anybody  has  actually  gone  to  prison 
for  a  violation  of  those  two  statutes. 

I  might  know  of  a  violation  of  the  proposed  law  by  somebody  I  am 
acquainted  with,  and  I  might  consider  it  my  pubhc  duty  to  complain 
and  cause  him  to  suffer  the  fine;  but  I  would  be  slow  to  take  measures 
that  would  lead  to  the  imprisonment  of  a  man  I  knew.  We  all  have 
that  feeling. 

Mr.  Burke.  Would  that  be  true  if  you  were  injured  in  any  way  by 
the  violation,  or  are  you  simply  expressing  your  opinion  as  a  disin- 
terested citizen  who  might  observe  a  violation  of  law  ? 

Dr.  Johnson.  I  was  speaking  as  a  disinterested  citizen,  of  course. 
But  this  is  the  kind  of  an  offense  the  punishment  of  which  we  associate 
with  fines  rather  than  with  prisons,  I  think. 

The  Chairman.  All  the  penalties  in  this  act  read  in  the  alternative. 

Dr.  Johnson.  Yes. 

The  Chairman.  The  experience  with  juries,  1  think,  has  been  that 
they  are  disinclined  to  enforce  the  imprisonment  penalty,  because 
these  acts  are  performed  by  agents  and  the  agents  are  acting  under 
authority.  In  other  words,  they  feel  that  the  people  higher  up  are 
the  ones  who  control  the  policy,  and  these  agents  who  may  be  indicted, 
are  performing  the  service  merely  as  agents;  and  they  are  not  dis- 
posed to  visit  the  penalty  of  imprisonment  upon  them.  And  I  pre- 
sume that  is  in  many  instances  the  reason  why  they  are  disinclined 
to  enforce  that  part  of  the  penalty.  But  in  this  bill  that  penalty  is 
in  the  disjunctive;  that  is,  they  may  impose  one  or  both,  in  the  dis- 
cretion of  the  court. 

Dr.  Johnson.  I  do  not  think  there  is  any  special  objection  to  the 
imprisonment  penalty  being  in  the  bill;  but,  frankly,  I  do  not  think 
it  would  be  imposed  in  the  actual  enforcement  of  the  law. 

Mr.  Hardy.  There  is  only  one  way.  Doctor,  where  it  seems  to  me 
that  miglit  become  material.  Sometimes  these  great  corporations, 
of  immense  wealth,  pay  very  little  attention  to  a  fine;  they  do  not 
care  much  about  it.  But  if  we  have  a  little  imprisonment  it  would 
bring  them  to  terms  and  to  respect  the  law  at  once. 

The  Chairman.  I  am  very  much  obliged  to  you.  Doctor,  for  having 
come  here  at  my  request. 

Mr.  Greene.  I  have  a  communication  from  the  executive  com- 
mittee of  the  Boston  Chamber  of  Commerce,  and  I  have  also  a  tele- 
gram wliich  I  woidd  like  to  have  go  into  the  record. 

(The  telegram  and  communication  referred  to  by  Mr.  Greene  are  as 
follows:) 

Boston,  Mass.,  April  12,  1916. 
Hon.  Wm.  S.  Greene, 

1107  Seventeenth  Street,  Washington,  D.  C. 
Sections  5  to  7  of  House  resolve  14337  are  drastic  provisions  for  governmental  regu- 
lation of  ocean  rates  to  wliich  Boston  Chamber  Commerce  is  utterly  opposed.     Our 
position  on  this  point  is  covered  in  report  sent  you  few  days  ago.     Kindly  present  our 
views  to  the  committee  and  oblise. 

Elwyn  G.  Preston, 
Chairman  Merchant  Marine  Committee. 


42  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

report  of  the  special  committee  on  merchant  marine  on  the  bill  for  the 
government  ownership  and  operation  op  vessels  in  the  foreign  and  coast- 
wise trade. 

March  25,  1916. 
To  the  executive  committee  and  board  of  directors: 

A  year  a,?o  the  special  committee  on  merchant  marine  of  the  Boston  Chamber  of 
Commerce,  in  a  report  duly  approved  by  the  directors  of  the  chamber,  made  earnest 
objection  to  the  original  McAdoo  bill  for  Government  ownership  and  operation  of  com- 
mercial shipping.  That  bill  was  defeated  in  the  Congress  that  closed  last  spring,  but 
another  bill,  also  based  on  Government  ownership  and  operation,  but  otherwise  greatly 
changed,  has  been  reintroduced  (H.  R.  10500)  and  referred  for  consideration  to  the 
House  Committee  on  Marchant  Marine  and  1  isheries. 

Our  committee  of  the  Boston  Chamber  of  Commerce,  though  frankly  recognizing 
that  a  real  emergency  exists  in  the  inadequate  tonnage  and  high  rates  of  present  ocean 
trade,  can  not  escape  the  conclusion  that  the  new  bill  would  not  meet  this  emergency, 
but,  on  the  whole,  would  aggravate  it  by  discouraging  private  capital  and  enterprise, 
which  have  already  filled  American  shipyards  with  orders  for  the  construction  of  100 
steamships  of  from  3,000  tons  to  12,000  tons  gross  register,  soon  to  be  available  for  ocean 
service,  t  urther  orders  await  only  the  lifting  of  the  menace  of  Government  ownership 
and  the  securing  of  requisite  steel  materials  and  building  space.  There  is  every  pros- 
pect that  the  American  merchant  marine  during  the  present  war  will  increase  at  an 
unexampled  rate  if  not  forced  into  unequal  competition  with  the  wealth  and  power  of 
the  National  Government. 

Some  of  the  features  of  the  revised  bill  can  be  approved.  A  United  States  shipping 
board  for  the  general  supervision  of  the  merchant  marine  would  serve  a  valuable 
purpose  if  its  powers  were  carefully  defined  by  law  and  if  its  energies  were  not  wasted 
in  an  effort  to  outdo  the  overworked  Interstate  Commerce  Commission  and  minutely 
regulate  the  rates  charged  by  all  the  tens  of  thousands  of  merchant  vessels  under 
thousands  of  different  ownerships  that  now  convey  the  water-borne  trade  of  the  United 
States,  a  task  of  doubtful  wisdom  or  necessity  and  utterly  impossible  of  fulfillment. 
Unless  its  powers  are  so  defined  and  do  not  include  the  power  to  make  rates  we  do  not 
feel  warranted  in  approving  the  creation  of  such  a  l)oard. 

In  the  face  of  present  abnormal  conditions,  such  suitable  naval  auxiliaries  and 
transports  as  are  not  required  in  peace  may  Vv'ell  be  transferred  to  the  shipping  board 
for  lease  or  sale  to  shipowners  engaged  in  the  foreign  trade  of  the  United  States,  though 
this  at  best  is  only  a  small  expedient,  and  there  is  undoubted  risk  of  international 
complications  if  a  Government  auxiliary  under  private  charter  be  arrested  or  sunk 
by  a  belligerent  cruiser.  This  is  the  only  feature  of  the  new  bill  that  holds  any 
promise  of  immediate  relief.  Public  opinion  will  everywhere  approve  the  eiu'ollment 
of  citizen  officers  and  men  of  the  merchant  marine  in  a  volunteer  naval  reserve, 
properly  compensated  by  retainers  from  the  Government. 

Tiie  remainder  of  the  bill,  the  features  involved  in  Government  ownership  and 
operation,  is  unsound  and  ineffective,  and  deserves  the  united  opposition  of  the  busi- 
ness organizations  of  America.  No  large,  enduring  good  can  come  from  the  provision 
authorizing  the  Governmeut  to  build,  purchase,  or  charter  in  this  country  or  abroad  a 
fleet  of  naval  auxiliaries,  and  lease  or  sell  these  ships  for  purposes  of  trade.  Our  naval 
auxiliaries,  like  American  battleships,- cruisers,  and  submarines,  ought  to  be  built 
exclusively  in  the  United  States— not  in  foreign  yards,  under  the  observing  eyes  of 
oHicers  of  foreign  Governments.  All  shipyards  in  this  country  and  in  Europe  are  now 
overwhelmed  with  work — no  Government  ships  could  be  contracted  for  and  com- 
pleted within  two  or  three  years.  Before  that  time  the  emergency  will  have  ended, 
either  through  a  general  peace  or  tiie  financial  exhaustion  of  the  belligerent  i\ations 
that  are  now  abnormal  consumers  of  imported  goods. 

But  far  worse  than  the  commitment  of  the  Government  to  the  building  of  a  fleet 
of  auxiliary  merchant  siiips,  which  private  capital  and  expert  management  can  create 
more  quickly  and  at  loMcr  cost,  is  the  provision  in  section  8  of  the  bill  authorizing  the 
Government  to  embark  not  merely  in  the  ownership  but  in  the  "equipment,  main- 
tenance, and  operation"  of  merchant  vessels  in  the  overseas  and  presumably  also  in 
the  general  coastwise  trade  of  the  United  States.  This  is  the  most  radical  proposition 
yet  made.  There  has  never  been  the  shred  of  a  pretense  that  private  American  capital 
had  failed  to  utilize  the  coastwise  situation.  On  the  contrary,  under  the  century-old 
law  reserving  the  coastwise  trade  to  American  ships  and  sailors,  the  American  coast- 
wise fleet  has  grown  prodigiously  to  a  tonnage  exceeding  the  total  home  and  foreign 
tonnage  of  the  German  Empire,  or  thrice  the  whole  merchant  shipping  of  either  France 
or  Norway.  There  is  no  "monopoly  "  in  the  American  coastwise  trade.  Only  a  small 
fraction  of  its  vessels  run  in  regular  lines.     Six-sevenths  of  its  huge  tonnage  is  com- 


REGULATORY    FEATURES    OF    StllPPlNG    RILL.  43 

posed  of  "tramp"  cargo  craft,  steam  or  sail,  controlled  or  operated  by  thousands  of 
different  owners,  under  severe  competitive  conditions. 

To  allow  the  Lnited  States  Government  to  come  into  competition  with  our  immense 
fleet  of  private-owned  coastwise  ships  is  a  gratuitous  menace  to  an  American  industry 
that  has  jiistified  itself  by  a  strong,  constant  growth  and  is  to-day  the  chief  auxiliary 
'  reserve  of  our  ocean  defense  and  the  great  nursery  of  American  seamen. 

Whether  in  the  coast  trade  or  in  the  foreign  trade,  Government-owned  ships  operated 
without  regard  to  profit  and  guaranteed  against  loss  by  the  National  Treasury  would 
mean  the  swift  destruction  of  all  spirit  of  American  maritime  enterprise  and  personal 
initiative.  In  the  foreign  trade,  private-owned  American  ships  fighting  against  heavy 
odds  with  the  cheap  wages  and  subsidies  of  foreign  competitors,  would  be  compelled  to 
meet  a  new  competition  in  the  subsidized  ships  of  the  United  States  Government. 
Their  own  country  w^ould  be  making  war  on  American  shipowners. 

The  difference  in  the  cost  of  operation,  due  chiefly  to  different  wages  and  standards 
of  living  and  only  in  small  part  to  our  navigation  laws  and  rules,  would  be  just  as  great 
between  Government-owned  American  ships  and  foreign  ships  as  it  would  be  between 
private-owned  American  and  foreign  vessels.  The  handicap  due  to  subsidies,  bounties, 
or  other  national  aid  to  foreign  ships  would  be  as  heavy  in  the  one  case  as  in  the  other. 
But  this  difference  would  be  made  up  to  the  Government-owned  American  ships  out 
of  the  Federal  appropriation  of  the  shipping  board.  If  there  were  a  deficit  it  would  be 
compensated  for — to  Government-owned  ships — in  this  wav.  Every  Government- 
owned  sliip  would  thus  be  a  subsidized  vessel,  subsidized  in  disguise,  not  only  against 
all  foreign  ships  but  against  all  private-owned  American  competitors  as  well.  There 
would  then  be  this  grotesquely  unfair  situation — all  Government-owned  ships  sub- 
Bidized;  other  American  ships  in  the  same  trade  unsubsidized,  discriminated  against, 
and  driven  from  the  ocean. 

If  there  are  to  be  subsidii  s.  it  is  a  fundamental  principle  of  honesty  and  fair  play 
that  they  should  be  given  on  the  basis  of  equal  opportunity  to  all  American  ships, 
or  to  none.  The  Government-ownership  bill  inexcusably  violates  this  principle.  It 
creates  a  special-privileged  class  of  American  ships  in  the  limited  fleet  of  vessels 
owned  by  the  Government  itself — ships,  49  per  cent  of  the  stock  in  which  may  be  held 
by  a  few  private  investors.  Can  anyone  hope  to  defend  and  justify  such  a  scheme  as 
this  to  the  American  people? 

A  real  emergency  exists.  SometHng  must  be  done.  The  great  war  has  focused 
the  attention  of  the  country  as  never  before  upon  the  sea  and  ships.  There  is  an  unex- 
ampled opportunity  to  lay  broad  and  deep  the  foundations  of  an  adequate  American 
merchant  marine.  An  undoubted  obligation  rests  upon  all  those  who  oppose  Gov- 
ernment ownership  and  operation  to  point  to  another  and  a  better  way. 

That  way  can  be  found  in  the  recommendations  of  the  Chamber  of  Commerce  of 
the  United  States  in  connection  with  its  referendum  of  last  spring,  when  the  manu- 
factm-ers,  merchants,  and  bankers  of  the  country,  overwhelmingly  rejecting  the  idea 
of  Government  ownersliip  and  operation,  even  more  overwhelmingly  approved  positive 
legislation  of  another  kind,  as  follows: 

1.  Carefully  supervised  and  guarded  subsidies  from  the  Government  sufficient  to 
offset  the  difference  in  cost  between  operation  of  vessels  under  the  American  flag  and 
operation  in  the  same  deep-sea  trade  under  foreign  flags. 

2.  Subventions  from  the  Government  to  establish  regular  mail  and  freight  lines 
under  the  American  flag  to  countries  in  which  the  commercial  interests  of  the  United 
States  are  important  and  to  American  dependencies 

3.  The  creation  of  a  Federal  shipping  board  with  carefully  defined  jurisdiction 
to  investigate  and  report  to  Congress  regarding  the  navigation  laws,  and  to  have  author- 
ity under  the  law  in  all  matters  pertaining  to  oversea  transportation.^ 

4.  Amendment  to  the  ocean  mail  law  of  1891  by  readjusting  the  required  speed  of 
first  and  second  class  steamers  and  by  making  the  compensation  adequate  to  permit 
the  establishment  of  lines  of  steamers  carrying  both  mail  and  freight. 

These  recommendations  were  referred  to  and  approved  by  our  special  committee 
on  merchant  marine  and  were  formally  accepted  June  15,  1015,  by  the  directors  of 
the  chamber.  Under  these  policies,  when  conditions  become  normal  after  the  war, 
both  swift  regular  mail  ships  and  slower  but  indispensable  cargo  carriers  would  be 
encouraged  and  upheld  against  foreign  competition  by  the  United  States  Governnient, 
which  would  leave  the  ocean  trade  to  the  energy  and  courage  of  its  shipowners  and 
seamen. 

A  year  ago  our  committee  declared  that  "we  believe  it  to  be  a  sound  principle  that 
the  Federal  Government  should  not  engage  in  business  which  under  suitable  condi- 
tions can  be  conducted  to  equal  or  better  advantage  by  private  enterprise." 

'  This  was  not  understood  by  the  committee  to  contemplate  the  regulation  of  rates. 


44  REGULATOBY   FEATURES   OF    SHIPPING   BILL. 

Everything  that  has  transpired  since  then  has  emphasized  the  force  of  this  con- 
viction.    We.  therefore,  recommend  that  the  chamber  disapprove  these  features  of 
the  present  bill  (H.  R.  10500)  which  involve  Government  o\\nership  and  operation 
of  commercial  \essels  and  Government  regulation  of  ocean  rates. 
Respectfully  submitted. 

Elwyn  G.  Preston.  Chnirmun. 
Edward  E.  Blodgett,' 
l.  a.  coolidge, 
Frederick  Foster, 
Theodore  Jones, 
WiN'THROP  L.  Marvin, 
Robert  S.  Peabody, 
George  F.  Willett, 
Special  Committee  on  Merchant  Marine 

Mr.  Edmonds.  Mr.   Chairman,   may  I   put   this  letter  from   the 
Philadelphia  Board  of  Trade  in  the  hearing  ? 
The  Chairman.  Yes. 
(The  letter  referred  to  by  Mr.  Edmonds  is  as  follows:) 

Philadelphia  Board  of  Trade, 

Fhifadelphia,  April  12,  191^ 
Hon.  George  W,  Edmonds, 

House  of  Representatives,  Washington,  D.  C. 

My  Dear  Mr.  Edmonds:  Referring  to  your  favor  of  the  8th  instant,  covering 
House  bill  No.  14337,  in  wliich  you  announce  that  a  hearing  upon  same  will  be  held 
on  the  13th  instant,  I  beg  to  say  that  I  regret  that  the  board  of  trade  will  not  be  able 
to  be  represented  there. 

The  committee  on  foreign  and  coastwise  commerce,  to  wliich  this  bill  has  been 
referred,  has  not  yet  been  able  to  make  such  study  of  it  as  would  justify  its  being 
represented  at  the  hearing  in  question. 

A  cursory  examination  of  the  bill,  however,  proves  that  it  would  certainly  meet 
with  the  opposition  of  the  board  of  trade,  wMch  is  upon  record  in  opposing  the  ship 
purchase  bill  in  a  memorial  which  has  been  forwarded  to  Congress.  The  proAdsion 
in  that  bill  regarding  the  licensing  of  foreign  vessels  and  an  attempt  to  force  regula- 
tion upon  same  was  considered  as  most  unwise  and  likely  to  provoke  dangerous  con- 
troversies with  the  maritime  nations,  who  would  not  fail  to  resent  the  impairment  of 
any  right  contrary  to  treaty  or  custom. 

The  amended  measure  seems  equally,  if  not  more,  drastic  in  its  character  and  to 
have  been  drafted  without  much  regard  for  any  of  the  conditions  surrounding  the 
transportation  of  merchandisa  by  ocean  carriage.  This  is  particularly  emphaeized 
if  the  provision  in  section  4,  page  7,  be  understood  to  mean  that  under  no  circum- 
stances could  a  vessal  charge  a  different  rate  upon  a  like  kind  of  merchandise  or 
traffic.  This  provision  seems  to  ignore  entirely  the  varving  condilion  of  trade  in  the 
markets  of  the  world. 

_  You  will  readily  understand  that  there  are  times  in  the  changing  conditions  men- 
tioned when  it  is  absolutely  necessary  for  vessals,  in  order  to  complete  their  loading, 
to  be  able  to  make  such  reduction  in  rates  of  freight  as  will  secure  sufficient  cargo  to 
properly  load  the  vessal. 

I  am  sure  it  is  entirely  impractical,  unless  the  entire  business  of  ocean  carriage  is 
to  be  revolutionized,  to  attempt  to  name  a  maximum  rate  over  tlie  time  mentioned 
in  the  bill,  and  should  such  a  rate  be  named  to  apply  to  foreign  vessels  that  the  nations 
under  wliich  they  s.iil  would  not  hesitate  long  before  they  would  retaliate  by  some 
restrictive'  order  upon  American  vessels  which  would  undoubtedly  lead  to  interna- 
tional complications. 

The  closing  paragraph  of  the  bill,  in  which  reference  is  made  to  sundry  prior  acta 
of  Congress,  makes  it  impossible  at  this  time  to  understand  the  full  purpose  of  the 
measure  without  a  study  of  the  several  acts  referred  to. 

As  far  as  understood,  I  can  not  see  that  any  consideration  ha^  been  given  to  the  ques- 
tion of  the  regulation  of  what  might  l)e  termed  "tramp"  boats,  that  are  chartered  for 
full  cargoes  from  the  different  ports  of  the  United  States,  and  whidi  represent  a  large 
percentage  of  the  carrying  of  the  produce  of  the  country. 

As  you  know,  this  board  of  trade  is  o]iposed  to  the  principle  of  the  sliip-purchaso  bill 
and  finds  notliing  in  the  way  of  improvement  in  the  amendments  sought  to  be  incor- 
porated in  the  measure,  as  preseiited  to  ;"o:\i;re.s.s. 

>  Mr.  Blodgett  was  out  of  town  when  this  report  was  adopted  and,  therefore,  did  not  have  opportunity 
to  pass  upon  it. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  45 

If  tlie  pie.sent  legislation  aa  now  presented  to  Congi-ess  be  for  tiie  purpose  of  the  re- 
eatablishmeiit  and  upbuildine;  of  tlie  American  mercliant  marine,  it  will  prove  a  failure. 
I  am  convinced  that  the  enactment  into  law  of  the  proposed  bill  (H.  R.  14337)  would, 
after  the  abnormal  conditions  due  to  tlie  war  have  passed  away,  be  the  means  of  de- 
creasing the  amount  of  American  tonnage  and  preventing  the  profitable  handling  of 
fame  under  the  American  flag. 
Yours,  very  truly, 

J.  P.  Seeckiz,  Secretary. 

(Thei'oupon,  at  4  o'clock  p.  m.,  the  committee  adjourned  until  to- 
morrow, April  14,  1916,  at  2  o'clock  p.  m.) 


Committee  on  Merchant  Marine  and  Fisheries, 

House  of  Representatives, 
Washington,  D.  C,  Friday,  April  14, 1916. 
The  committee  met  at  2  o'clock  p.  m.,  Hon.  Joshua  W.  Alexander 
(chairman)  presiding. 

The  Chairman.  Mr.  Jacobs  is  here  from  the  Pacific  coast  and  in 
his  organization  he  has  done  some  work  on  merchant-marine  matters. 
He  is  on  his  way  to  Europe  and  I  thought  the  committee  would  like 
to  hear  him  briefly  on  H.  R.  10500;  that  is,  on  any  provisions  of  the 
bill  to  which  he  cares  to  address  himself.  We  have  under  considera- 
tion especially  at  this  time  the  provisions  of  bill  14337. 

STATEMENT  OF  ME.  ISIDOR  JACOBS,   SAN  FRANCISCO,   CAL., 
PRESIDENT  OF  THE  CALIFORNIA  CANNERIES  CO. 

Mr.  Jacobs.  I  am  president  of  the  Calif  or  aia  Canneries  Co.,  of 
San  Francisco;  president  of  the  Inland  Waterways  Association  of 
California;  also  director  in  the  Canners'  League  of  the  State  of  Cali- 
fornia. 

Mr.  Edmonds.  Is  that  a  private  concern? 

Mr.  Jacobs.  The  California  Canneries  Co.  is.  The  California 
League  is,  an  organization  of  practically  95  per  cent  of  all  the  fruit 
and  vegetable  canners  of  California,  associated  together  not  for 
profit  but  for  mutual  protection  of  the  industry. 

The  Chairman.  Lias  your  league  given  any  consideration  to  this 
question  of  shipping? 

Mr.  Jacobs.  Yes,  sir.  At  the  annual  convention  which  was  held 
at  the  Palace  Hotel,  San  Francisco,  in  January,  at  which  an  output 
practically  of  $20,000,000  per  annum  was  represented,  a  resolution 
was  presented  and  was  carried  unanimously,  after  considerable  dis- 
cussion, indorsing  the  bill  that  you  have  for  the  creation  of  a  merchant 
marine. 

The  Chairman.  H.  R.  10500? 

Mr,  Jacobs.  Yes.  I  think  the  resolution  was  sent  to  your  chair- 
inan. 

The  Chairman.  Yes;  it  is  in  the  record — page  226,  of  the  hearings 
on  H.  R.  3  0500. 

Mr.  Jacobs.  Yes. 
(Mr.  Edmonds.  Did  you  have  the  bill  at  that  meeting? 

Mr.  Jacobs.  Yes.     The  Commercial  Club  had  it  there. 
■  Mr.  Edmonds.  How  was  the  action  taken — reading  it  by  sections 
iihd  taking  up  each  section;  or  did  you  take  it  up  as  a  whole  ? 


46  REGULATOKY    FEATURES   OF    SHIPPING   BILL. 

Mr.  Jacobs.  They  took  it  up  as  a  whole.  The  bill  was  read  and 
then  was  taken  up  as  a  whole.  The  reason  it  was  not  considered  sec- 
tion by  section  was  because  there  was  no  opposition  manifested  in  the 
discussion.  The  discussion  took  the  line  of  something  being  abso- 
lutely necessary  to  roheve  the  present  burdensome  conditions  that  the 
fruit  industry  is  laboring  under  in  seeking  foreign  markets  and  which 
it  has  been  laboring  under  for  a  long  time.  The  discussion  took" 
entirely  the  Une  of  addresses  on  the  necessity  for  prompt  action  to 
relieve  the  situation. 

We  are  confronted  there  by  practically  a  loss  of  our  entire  industry 
unless  some  relief  is  had,  unless  we  can  get  ships  to  move  our  products 
to  the  markets.  The  foreign  trade  heretofore  has  been  nearly  entirely 
in  the  hands  of  the  British  steamship  owners  and,  whether  by  com- 
bination or  otherwise,  rates  have  been  estabhshed  by  the  different 
companies  at  the  same  time  and  the  same  rates.  After  the  Pacific 
Mail  was  purchased  by  the  Atlantic  Transport  Line — the  rates  had 
been  very  high — they  dropped  the  rates  to  get  some  of  their  steamers 
loaded  for  Englard  ard  immediately  the  other  hues  all  dropped  at 
the  same  time.  The  rates  are  now  about  600  per  cent  higher  than 
they  were  before  the  war  started,  but  even  before  the  war  started, 
they  found  their  ability  to  advance  rates,  and  although  the  opening 
of  the  Panama  Canal  reduced  the  time  in  transit  from  San  Francisco 
to  Liverpool  ard  London  to  30  days  instead  of  60  days — although 
some  of  the  steamers  used  to  take  90  days  around  via  the  Straits  of 
Magellan — they  gave  the  shippers  no  concessions  at  all  as  a  considera- 
tion for  the  opening  of  the  canal;  the  rates  remained  the  same.  They 
did  not  consider  there  was  any  advantage  obtained  as  far  as  the  ship- 
pers were  concerned  and,  of  course,  that  means  the  producers  of  our 
State  as  well — there  was  no  advantage  obtained  by  the  fact  that  the 
canal  had  been  opened,  and  the  fact  that  their  cost  of  transportation 
had  been  reduced  considerably  upon  that  account. 

Mr.  Edmonds.  What  percentage  of  your  goods  goes  to  foreign 
markets  ? 

Ml'.  Jacobs.  Personally,  our  own  concern,  85  per  cent  of  our  busi- 
ness is  in  foreign  markets.  But  of  the  output  of  our  California  canned 
fruits,  about  35  per  cent — probably  from  35  to  40  per  cent. 

Mr.  Edmonds.  Goes  to  foreign  markets? 

Mr.  Jacobs.  Yes.  In  our  own  trade,  though,  it  is  85  per  cent  in 
our  own  business. 

I  may  say  that  this  question  of  an  American  merchant  marine 
has  been  up  before  our  annual  conventions  for  the  last  12  years; 
every  year  the  same  discussion  has  come  up,  and  we  favored  the  ship 
purchase  bill  which  was  defeated  in  the  last  Congress.  We  believe 
if  that  bill  had  been  adopted  the  present  conditions  would  have  been 
relieved,  because  we  would  have  had  sufficient  tonnage  controlled, 
either  directly  or  indirectly,  by  the  Government  to  have  kept  a 
leverage  upon  rates.  If  I  remember  correctly — I  was  chairman  of  the 
committee  of  the  league  at  the  time — I  think  it  was  expected  that  the 
Government  would  control,  either  directly  or  indirectly,  over  600,000 
tons,  and  that  would  have  been  sufficient  in  this  country  not  only  in 
California,  but  for  the  fruit  trade  of  the  country  and  the  East  as  well 
as  West,  to  have  kept  a  leverage  upon  the  freight  rates  which  to-day, 
although  they  say  they  are  based  entirely  upon  supply  and  demand, 
as  a  matter  of  fact  are  based  upon  all  they  can  get.     And,  as  I  say, 


REGULATORY    FEATURES    OF    SHrPPING    BILL.  47 

they  keep  on;  there  is  no  stabihty  now.  If  we  to-day  should  enter 
into  contracts  in  Nonvay  and  Sweden — they  started  in  by  telhng 
us  the  rates  would'be  100  shillings;  by  the  time  we  got  the  contract, 
they  said  now  the  rate  is  150  shillings.  Well,  we  said  we  would  have 
to  submit  that  to  the  buyer  on  the  other  side.  Two  days  later,  if  we 
had  an  order  come  m,  they  would  say  the  rate  is  170.  And  so  it 
went  on,  and  we  got  disgusted  and  just  quit  trying  to  quote  at  all. 

Mr.  Edmonds.  Still,  you  expected  the  buyer  on  the  other  side  to 
pay  the  freight  rate,  whatever  it  was  ? 

Mr.  Jacobs.  Naturally.  The  goods  are  sold  "c.  i.  f.;"  that  is,  tho 
goods  are  sold  cost,  insurance,  and  freight  delivered  in  the  foreign 
markets.  But  we  would  figure  the  thing  down  just  as  low  as  we 
possibly  could  and  if  there  was  anything  in  it  we  would  take  the 
order;  but  as  it  turned  out,  for  instance  at  Genoa,  last  year,  wo 
made  a  contract  wdth  a  shipping  company  in  New  York,  the  Italian 
line,  and  we  sold  tho  goods  based  upon  that  freight  rate.  The  goods 
went  thi-ough  the  Panama  Canal — it  was  before  the  slide  started; 
when  they  got  to  New  York,  they  got  there,  so  they  said,  one  day 
after  the  steamer  had  sailed  on  which  they  expected  to  put  these 
goods  and  they  boosted  the  rate  on  us.  And  on  that  little  shipment 
we  lost  $1,800  below  the  absolute  cost  of  the  goods.  So  we  just  quit 
the  business  after  that;  we  would  not  quote  at  all. 

Mr.  Edmonds.  You  are  selling  goods  to-day.  though,  subject  to 
those  conditions? 

Mr.  Jacobs.  Very  few,  though,  on  account  of  the  high  fr?ight 
rates.  We  are  practically  stopped  now  on  account  of  the  tremen- 
dous freight  rates.  You  can  imagine  what  it  amounts  to  w^hen  I  tell 
you  that  the  present  freight  rate  to  England  is  $1.37  a  case  for  two 
dozen  cans  of  fruits,  when  at  the  beginning  of  last  year  the  rate  was 
35  cents  a  case. 

Tho  Chairman.  It  is  now  how  much  ? 

Mr.  Jacobs.  $1.37. 

The  Chairman.   As  against  35  cents  last  year? 

Mr.  Jacobs.  Yes.  So  you  can  see  that  it  practically  means  the 
cessation,  the  absolute  impossibility,  of  sending  any  more  goods  there 
under  these  rates,  unless  they  are  absolutely  necessary.  If  the  Gov- 
ernments over  there  buy  some  of  these  goods  and  have  to  have  them, 
of  course,  they  will  pay  that  rate;  but  it  has  knocked  off  the  French 
trade  completely.  We  started  in  to  send  30,000  cases  of  goods  to 
Paris  through  Havre  and  engaged  a  ship  to  Havre,  but  the  rates  from 
New  York  became  so  tremendous  we  could  not  ship  them.  To  show 
there  was  no  stability  to  it,  we  had  our  own  office  in  New  York,  and 
they  thought  we  had  the  goods  coming  on  the  way  to  New  York  and 
they  had  to  go  on  one  of  these  steamers,  so  they  boosted  the  rates  to 
200  shillings.  I  immediately  wired  the  office  in  New  York  and  told 
them  to  keep  the  goods  there  and  not  to  ship  them,  and  they  reduced 
the  rate  to  150  shillings  the  next  morning,  a  difference  of  50  shillings. 

Mr.  Edmonds.  Yes;  they  were  getting  the  best  price  they  could 
get,  there  is  no  doubt;  I  do  not  think  there  is  any  question  about  it — 
just  the  same  as  you  would  do  for  your  goods  or  any  other  man,  get 
the  best  price  he  can. 

Mr.  Jacobs.  Yes.  We  believe  the  national-bank  reserve  act  has 
reheved  the  fuiancial  stress  upon  business  by  reheving  us  from  pan- 
ics or  panicky  conditions,  and  we  believe  that  the  time  has  come 


48  REGULATORY   FEATURES   OF    SHIPPING   BILL. 

now  that  the  United  States  Goveinniont  should  rchevo  the  business 
conditions,  in  getting  a  foreign  market,  by  reguhiting  tlie  steamship 
business  under  the  American  flag.  We  think  that  it  can  be  done. 
It  has  been  tried  for  40  years  without  regulation,  and  nothing  has 
been  accomplished,  just  as  we  had  been  trying  for  years  with  the 
currency  act  and  never  had  been  able  to  accomplish  the  results  with 
that.  I  l)elieve  the  purpose  of  the  currency  act  was  to  relieve  busi- 
ness conditions  so  tliat  they  might  not  tremble  all  over  this  country; 
and  I  believe  the  business  men  now  know  where  they  are.  I  believe 
the  same  thing  about  the  j^Vinerican  merchant  marine.  I  might  say, 
though,  pereonally,  that  our  large  organizations  have  been  fighting  it — 
the  large  chambers  of  commerce  throughout  the  country — but  we 
beheve  they  do  not  represent  the  general  run  of  business  interests 
in  this  country  to-day  in  connection  with  the  establishment  of  an 
American  merchant  marine  any  more  than  they  did  in  connection 
with  the  reserve  act. 

The  Chairman.  Wliy  do  you  think  that? 

Mr.  Jacobs.  Because  we  find  in  getting  out  these  referendunis  that 
the  United  States  Chamber  of  Commerce  got  out  that  in  our  local 
chambers  of  commerce  in  all  large  cities  like  San  Francisco,  Los 
Angeles,  Portland,  Seattle,  and  in  the  East,  New  York  and  all  the 
large  ports,  they  sent  out  a  letter  to  their  members.  We  will  say 
that  our  local  chamber  of  comn^erce  in  San  Francisco  consists  of 
3,700  members  and  they  will  send  out  a  letter  to  them  saying,  "We 
are  asked  by  the  Cliamber  of  Commerce  of  the  United  States  to  take 
a  referendum  upon  whether  you  believe  in  the  establishing  of  an 
American  merchant  marine;  we  recon\mend  that  you  answer  "yes.'" 
"Do  you  believe  in  the  establishing  of  an  American  merchant  marine 
by  the  Governmert  having  anything  to  do  with  it?  We  recommend 
that  you  answer  'no.'"  "Do  you  believe  in  it  by  means  of  subsidy? 
We  recommend  that  you  answer  'yes."' 

I  tested  that  by  sending  out  a  letter  myself  to  the  members  of  our 
local  chamber  of  commerce.  The  answers  received  by  the  chamber 
of  commerce  itself  were  between  500  and  600  out  of  3,700  members. 
I  got  over  800  answers  directly  opposed  to  the  referendum  that  the 
chamber  of  commerce  took,  but  I  did  not  suggest  how  they  should 
.answer  the  questions. 

Mr.  Greene,  May  I  ask  you  a  question? 

Mr.  Jacobs.  Yes. 

Mr.  Greene.  Do  you  mean  to  say  that  the  chamber  of  commerce 
in  their  document  that  they  sent  out  indicated  how  they  wanted 
them  to  reply  ? 

Mr.  Jacobs.  Yes,  sir;  and  I  have  one  in  my  possession. 

Mr.  Greene.  I  would  be  glad  to  see  one. 

Mr.  Jacobs.  I  would  be  glad  to  send  it  to  you. 

Mr.  Greene.  I  know,  but  where  is  it?     Is  it  at  the  hotel? 

Mr.  Jacobs.  I  would  be  glad  to  send  it  to  you. 

Mr.  Greene.  I  have  the  documents  and  I  have  never  seen  any- 
thing of  the  kind. 

The  Chairman.  He  is  going  to  send  it  to  you  he  says. 

Mr.  Byrnes.  He  is  talking  about  the  organization  sending  it  to 
the  members  ? 

Mr.  Jacobs.  Yes;  in  San  Francisco. 


REGULATORY  FEATUHKS  OF  SI  I  li'l'I  i\(;  BiLI..  49 

Mr.  Greene.  Oh,  yes;  1  know  what  he  said,  llo  said  they  liked 
to  have  you  vote  "ves;"  '"we  bohovo  'ves.'"  Or  "wo  want  you  to 
vote  'no.'" 

Mr.  Jacobs.  I  did  not  say  that. 

Mt;  Greene.  What  did  you  say  ( 

Mr.  Jacobs.  I  said  the  local  chunilx'r  of  conimerce  sent  a  letter  to 
their  members  with  the  referendum  and  in  this  letter  they  said  "Our 
board  of  directors  on  merchant  marine,  or  committee,  have  agreed 
to  recommend  that  you  vote  'no'  to  this  ()uestion,"  and  so  forth. 

Mr.  Greene.  That  is  different.  I  understood  you  to  say  the 
United  States  Chamber  of  Commerce. 

Mr.  Jacobs.  No;  I  did  not  say  that. 

Mr.  Hadley.  He  was  not  clear  in  it  and  I  was  about  to  ask  the 
question  to  which  one  he  referred,  myself. 

The  Chairman.  I  was  not  clear  about  it  myself. 

Mr.  Greene.  I  understood  you  to  say  the  United  States  Chamber 
of  Commerce  sent  out  that  appeal.  They  sent  out  a  direct  appeal 
without  makhig  any  recommendation  at  all  to  the  people  about 
how  they  should  reply  to  it. 

Ml-.  Jacobs.  I  beg  your  pardon;  they  did  not  send  out  any  direct 
appeal  at  all;  they  only  sent  it  to  the  local  chambers  of  commerce. 
They  only  sent  it  to  the  members  of  the  United  States  Chamber  of 
Commerce,  which  is  made  up  of  the  organizations  and  some  in- 
dividuals. 

Mr.  Byrnes.  I  understood  the  gentleman. 

Mr.  Edmonds.  Mr.  Jacobs,  I  was  visited  by  a  man  the  other  day 
who  runs  quite  a  largo  fruit  and  vegetable  farm — he  grows  tomatoes, 
and  so  on — and  he  wanted  me  to  draw  up  a  bill  for  the  Government 
to  go  into  the  canning  business.  He  said  the  exactions  of  the  canners 
were  so  severe  and  the  price  paid  for  the  tomatoes  so  small,  he  thought 
the  Government  ought  to  go  into  the  canning  business. 

Mr.  Jacobs.  Yes,  sir. 

Mr.  Edmonds.  That  is  something  on  the  same  order  as  going  into 
the  shipping  business.  That  would  be  perfectly  justified  and  I  pre- 
sume your  association  would  recommend  that  if  I  put  in  a  bill? 

Mr.  Jacobs.  I  do  not  thmk  it  is  a  perfectly  smiilar  situation  at  all. 
But  I  do  not  think  I  would  object  to  it  if  it  was  for  the  benefit  of  the 
people.  I  think  they  would  recommend  it  if  it  was  for  the  benefit  of 
the  people. 

1  want  to  give  you  an  idea  by  something  that  is  on  record  here  in 
Washington  right  now.  It  has  not  boon  generally  known — although 
I  was  engaged  in  that  fight — but  it  is  exactly  the  same  tiling  that  is 
going  on  to-day  with  these  matters.  Under  President  Roosevelt 
we  brought  to  the  attention  of  the  administration  in  Washington 
that  the  Pacific  Mail  Steamship  Co.  going  out  of  San  Francisco  was 
not  seeking  any  business  and  that  formerly  when  it  was  organized 
by  the  Southern  Pacific,  the  railroad  owning  55  per  cent  of  the 
stock  of  that  c(nr.pany,  they  received  a  subsidy  of  $900,000  a  year 
from  the  transcontinental  railroads  to  go  out  of  the  port  of  San 
Francisco  eni])ty  on  their  business  to  tiie  Atlantic.  When  the 
contract  was  broken  up  through  our  efl'orts  or,  rather,  an  organ- 
ization which  I  formed  out  there,  the  Pacific  Mail  still  did  not  seek 
any  business,  and   a  comiuittcH'  of  the  chamber  of  conimerce  was 

.38.5.34—16 4 


50  lti:oLLAiOKY    lEA'lLKES    OF    SUimisG    lilLL. 

appointed  to -investigate.  After  a  great  deal  of  trouble  wc  had  a 
committee  appointed  to  investigate  the  matter;  we  called  the  atten- 
tion of  the  administration  in  Washington  to  it  and  Mr.  Taft,  who 
was  then  Secretary  of  War,  sent  Mr.  Bristow  out.  He  was  appointed 
special  Panama  commissioner  to  go  out  and  examine  into  the  condi- 
tions we  had  comphxined  about.  He  reached  .California  and  went 
up  and  down  the  State;  he  had  a  hearing  hi  the  State  of  Oregon, 
one  hi  Washington,  and  in  different  places  hi  California,  too;  but 
he  could  not  get  any  expression  on  the  part  of  the  mercliants  because 
they  were  afraid  to  express  themselves  hi  the  presence  of  tlie  rail- 
road officials  and  the  steamship  officials.  .4nd  I  made  the  suggestion — 
altliough  we  have  been  large  shippers  always — the  only  way  he  would 
get  at  the  facts  was  to  invite  them  to  his  liotel  and  get  in  secret  the 
information  they  were  afraid  to  give  in  public.  And  in  his  report 
which  is  on  file  in  Congress— you  have  the  report  somewhere,  T  know, 
and  you  can  find  it  very  easily — he  says  lie  then  obtained  the  true 
facts.  Notwithstanding  tliat,  the  chamber  of  commerce  brought  in 
a  report  acknowledging  the  conditions — that  is,  the  committee  did — 
and  objecl^ed  to  any  interference  on  the  part  of  the  Government. 
And  immediately  we  came  on  here  and  we  saw  Mr,  Bernard  Baker, 
who  was  then  in  "the  shipping  business,  and  he  said  if  the  situation  did 
not  change  he  would  start  a  steamship  line  to  relieve  the  situation, 
and  immediately  the  Amcn-ican-Hawaiian  Steamship  Line  was  started 
and  there  was  an  increase  in  the  ocean-borne  traffic  from  15,000  tons, 
I  think  it  was,  per  annum — I  have  the  correct  figures  in  my  suit  case — 
to  something  like  225,000  tons  ])er  annum  in  one  year.  And  from 
that  time  on  it  commenced  to  increase.  So  that  the  chambers  of 
commei-ce  do  not  represent — our  chamber  of  commerce,  and  I  am  a 
member  of  it,  and  I  do  not  hesitate  to  tell  them  just  what  I  am 
8 lying  right  here — the  business  interests  of  the  country.  They 
r.^present  generally  the  one  ir.an  who  is  able  to  control  the  boards 
ol"  directors  in  those  organizations. 

Mr.  Hadley.  You  predicate  that  general  statement  upon  what 
you  observed  in  San  Francisco  ? 

Mr.  Jacobs.  Ai\d  elsewhere.  I  have  made  it  my  business,  and  I 
am  doing  it  at  my  own  expense.  I  have  been  up  and  down  the  coast 
tryhig  to  break  up  this  system,  and  I  delivered  an  address  to  the 
chamber  of  commerce  in  Portland  about  four  months  ago.  I  deliv- 
ered five  addresses  up  there  to  the  diffareiit  commercial  organizations 
in  two  clays,  and  when  I  was  invited  there  I  wrote  to  the  president 
that  they  would  not  like  what  I  had  to  say.  He  said,  "Well,  we  are 
here  to  hear  what  you  have  to  say."  And  when  I  finished,  there  was 
quite  a  crowd  there  and  ex-Gov,  West  of  Oregon  got  up  and  said 
he  was  gohig  to  get  off  his  chest  something  he  had  had  there  for  a 
long  time,  and  he  substantiated  what  I  said.  And  the  vote  was 
taken  there,  and  it  was  nearly  unanimous  on  the  part  of  the  mem- 
bers, repudiathig  the  action  of  the  Chamber  of  Commerce  of  Port- 
land hi  connection  with  the  shipping  bill. 

The  Chairman.  I  was  there  and  met  with  the  subcommittee  that 
had  the  shipping  bill  under  consideration,  and  the  majority  of  the  com- 
mittee was  made  up  of  railroad  and  steamship  men,  ana  their  report 
never  was  submitted  to  the  chamber  of  commerce  for  ratification;  yet 
you  have  their  report  as  the  sense  of  that  organization.  And  at  Seattle, 
the  Commercial  Club  indorsed  the  old  ship  purchase  bill,  and  the 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  51 

chamber  of  coinmorce,  made  up  of  those  mterests  and  controlled  by 
the  same  elements  to  which  you  refer,  opposed  it. 

Mr.  IIadley.  I  want  to  disclaim  any  acquiescence  in  the  last 
statement  of  the  chairman,  as  to  the  nature  of  the  organization  of 
the  Seattle  Chamber  of  Commerce. 

The  Chairman.  T  was  told  that  by  tiie  secretary  of  the  Commer- 
cial Club. 

Mr.  Hadley.  I  am  not  going  to  debate  it;  1  just  want  to  (hsclaim 
the  statement.     I  know  something  of  the  situation  in  Seattle. 

Mr.  Edmonds.  A  situation  like  that  is  not  true  of  the  eastern 
chambers  of  commerce;  I  will  say  that.  I  do  not  know  anything 
about  the  West. 

Mr.  Greene.  It  is  not  true  in  Massachusetts. 

The  Chairman.  Mr.  Rosenthal  said  two  memb(>rs  of  the  Com- 
mercial Club  of  Chicago — composed  of  5,000  members — made  the 
report  on  this  bill,  and  his  statement  has  gone  unchallenged  so  far. 

Mr.  Edmonds.  But  even  on  the  face  of  your  own  statement,  the 
canners  have  not  taken  up  this  situation  at  all;  they  have  only 
taken  up  the  question  of  Government  ownership. 

Mr.  Jacobs.  I  did  not  say  that;  I  said  that  the  sentiment  at  our 
meeting  was  that  it  does  not  make  much  difl'erence  how  we  get  an 
American  merchant  marine  as  long  as  we  are  going  to  get  it  in  the 
right  way. 

Mr.  Edmonds.  All  you  want  is  a  merchant  marine? 

Mr.  Jacobs.  Yes;  that  is  what  we  want. 

Mr.  Edmonds.  That  is  exactly  what  I  am  driving  at,  and  on  the 
face  of  your  statement  I  say  you  did  not  study  this  bill  any  more 
than  the  chamber  of  commerce  did. 

Mr.  Jacobs.  I  did. 

Mr.  Edmonds.  You  may  have,  personally,  but  the  f)rganization 
did  not. 

Mr.  Jacobs.  I  did  not  say  they  did. 

Mr.  Edmonds.  You  know  just  as  well  as  I  do  how  those  things  are 
conducted.  I  belmg  to  boards  of  trade  and  chambers  of  commerce, 
and  I  know  myself,  and  I  will  say  this,  in  the  East  that  we  never  get 
anything  through  without  having  a  big  fight  on  our  hands,  particu- 
larly when  it  is  anything  as  big  as  this. 

Mr.  Jacobs.  At  the  Inland  Waterways  Association,  which  has 
probably  a  much  larger  and  more  representative  organization  of 
men,  because  it  is  composed  largely  of  producers  in  the  State,  the 
bill  was  debated,  and  the  reason  it  was  debated  was  that  the  resolu- 
tions committee  of  19  brought  in  a  favorable  report — a  unanimous 
report  on  the  bill. 

The  Chairman.  Where  was  that? 

Mr.  Jacobs.  The  Inland  Waterways  Association  at  its  annual 
convention.  You  have  a  copy  of  their  proceedings  here.  I  think  I 
left  it  with  you  this  morning.  The  bill  was  ]3resented  on  the  floor,  and 
the  first  man  to  get  up  and  oppose  it  was  Col.  Irish,  the  same  man  we 
have  always  looked  to  oppose  everything;  the  same  man  who  fought 
us  when  we  had  the  Pacific  Mail  matter  up  years  ago,  when  we  wanted 
to  reheve  the  situation;  but  I,  as  president  of  the  organization,  did 
not  feel  it  was  right  for  me  to  attack  his  position,  so  I  said  nothing 
and  was  just  ready  to  preside,  which  I  did.  Finally,  a  gentleman 
from  the  northern  part  of  the  State,  a  large  producer  up  there,  got 


52  KEt;ULATOKY    FEATURES    OF    SHIPPING    BILL. 

the  floor,  and  he  showed  that  Col.  Irish  had  always  represented,  in 
connection  with  his  attitude  on  questions  of  that  kind,  the  special 
interests,  and,  in  fact,  was  employed  by  the  special  interests. 

The  Chairman.  What  do  you  mean  by  ^'special  interests?" 

Mr.  Jacobs.  I  mean  the  large  railroads  and  others  who  have  })cen 
in  the  past  opposed  to  measures  of  this  kind. 

Mr.  Edmonds.  Is  not  the  canners  association  a  special  interest? 

Mr.  eJACOBS.  No;  the  Canners  League,  as  I  say,  is  an  association 
not  for  profit.  I  am  not  representing  the  association  here.  That 
is  a  much  larger  concern  than  we  are. 

Mr.  Edmonds.  You  are  a  special  interest,  so  it  works  out  in  Cali- 
fornia. 

Mr.  Jacobs.  We  are  one  of  the  independents,  then,  because  we  are 
not  affiliated  with  them.  After  the  debate  took  place  there  were 
two  speakers  that  opposed  this  bill,  and  the  attitude  on  the  part  of 
both  of  them  was  well  known  in  the  convention  before  they  even 
came  there.  And  here  was  a  representative  gathering  of  men  from 
all  parts  of  California — in  fact,  the  report  says  it  was  the  largest  and 
most  representative  gathering  held  in  12  years  of  a  league  conven- 
tion; the  big  room  in  the  Palace  Hotel  was  packed  to  the  doors — 
and  it  was  carried  practically  unanimously.  I  think  there  were  two 
or  three  votes  against  it,  but  they  were  so  few  no  attention  was  paid 
to  them.  And  the  whole  thing  was  fought  out  on  the  ground  of 
Government  interference  in  the  shipping  business. 

Now,  I  do  not  say  that  I  favor  Government  interference;  I  do  favor 
an  American  merchant  marine,  but  I  am  not  like  a  great  many  of 
our  directors  in  our  chambers  of  commerce  who  howl  loud  for  an 
American  merchant  marine,  but  only  want  it  one  way,  and  that  is 
by  means  of  su])sidy.  I  favor  an  American  merchant  marine  to 
relieve  the  conditions  in  this  country,  but  not  for  my  own  interests, 
because  I  hope  to  be  out  of  business  very  shortly;  I  am  pretty  near 
through  witli  business. 

Mr.  Edmoxds.  Would  you  ba  satisfied  if  the  Go/ernment  were  to 
buy  $50,033,093  worth  of  sh'pi  and  ^our  association  or  an  association 
of  the  shippers  in  San  Francisco  could  charter  one  or  two  of  those 
ships,  or  three  or  four  of  them  at  a  reasonable  price  and  carry  your 
goods  ? 

Mr.  Jacobs.  Would  I  be  satisfied? 

Mr.  Edmonds.  Yes. 

Mr.  Jacobs.  I  do  not  know.  I  have  not  given  any  thought  to  it, 
but  I  think  so. 

Mr.  Edmoxds.  Or  do  you  want  the  Government  to  run  a  compaay 
from  San  Francisco  to  London  and  Paris  for  the  200  cases  or  300  cases 
that  you  lia /o  to  sh'p  ? 

Mr.  Jacobs.  I  will  tell  you  I  believe  if  the  Government  put  $50,000,- 
000  into  ships  and  leased  them  to  private  companies  and  lost  the 
whole  $50,000,000  in  a  year,  they  would  save  this  country  two  hun- 
dred million  in  a  year  by  the  regulation  of  freight  rates,  and  that 
would  redound  to  the  benefit  of  the  producers  and  business  men  of  this 
country. 

Mr.  Hadlky'.  Is  your  discussion  on  the  theory  that  is  what  is  to  be 
done? 

Mr.  Jacobs.  'Vo  lose  the  money? 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  53 

Mr.  Hadley.  No;  I  say  is  your  discussion  <m  the  theory  that  is 
what  is  to  be  done  in  the  bill  ? 

Mr.  Jacobs.  No;  I  understand  in  the  bill  the  Government  is  not  to 
operate  the  steamers  at  all  unless  they  can  not  find  individual  compa- 
nies to  operate  them;  that  the  Gov^ernment  is  merely  to  provide  the 
money  and  if  they  build  the  steamers  they  are  to  lease  them  to  private 
corporations  and  they  are  to  retain  control  over  them  by  certain 
regulations  and  the  Government  is  to  have  the  right,  the  same  as  the 
English  Government  did  in  loaning  money  to  the  Cunard  Line  to 
build  the  Mauretmvi  and  the  LusiHnia,  they  have  the  right  to  make 
naval  auxiliaries  of  them  in  case  of  war.  And  I  believe  if  we  had  a 
war  to-morrow  our  N  avy  would  not  be  worth  2  cents  because  we  could 
not"  get  steamers  to  supply  our  navy  with  what  they  need;  with  the 
present  shortage  of  steamers  it  would  be  a  pretty  hard  proposition. 

Mr.  Hadley.  That  is  what  you  understand  in  reference  to  the  bill  ? 

Ml'.  Jacobs.  The  general  tenor  of  it. 

Mr.  Hadley.  I  mean  that  feature  of  it  ? 

Mr.  Jacobs.  Yes. 

Mr.  Edmonds.  The  board  would  have  the  right  to  establish  lines 
any  place  they  please. 

Mr.  Jacobs.  If  they  found  they  could  not  do  it  in  any  other  way. 

Mr.  Edmonds.  There  is  no  limitation  in  it. 

The  Chairman.  I  assume  the  board  would  have  as  much  sense  as 
we  would,  i'.nd  I  am  sure  Brother  Greene  would  not  establish  a  line 
where  the  tr<.de  was  being  amply  served  and  at  reasonable  rates.  I 
know  I  would  not. 

Mr.  Jacobs.  We  believe  the  Government  ought  to  have  started  a 
line  of  steamers  on  the  Pacific  at  the  time  the  Pacific  Mail  Steamship 
Co.  made  refusal  to  haul  the  freight  and  had  to  go  out  in  ballast.  We 
were  all  bottled  up  and  could  not  get  freights  and  had  to  pay  what- 
ever the  rates  were.  On  the  Atlantic  your  Government  had  a  line 
of  steamers  running  to  the  Isthmus,  but  we  could  not  get  any  relief 
on  the  Pacific;  and  in  that  case  I  believe  they  should  have  started  it. 

The  Chairman.  Senator  Bristow  introduced  a  bill  for  a  Govern- 
ment owned  and  operated  line  of  ships  from  the  Panama  end  of  the 
canal  to  the  Pacific  coast. 

Mr.  Jacobs.  I  think  Senator  Flint  did,  too. 

The  Chairman.  Well,  Senator  Bristow  did;  just  to  meet  that 
situation,  I  think. 

Mr.  Jacobs.  Now,  as  to  this  other  bill  here,  of  course  I  only 
had  it  to-day  and  just  looked  over  it — bill  14337.  I  want  to  say  I 
am  most  heartily  in  favor  of  a  bill  of  this  nature,  because  I  think  if 
the  Government  is  going  to  give  us  an  American  merchant  marine 
they  sliould  retain  control  over  the  shipping  business  by  seeing  there 
is  no  discrimination  I  believe  the  big  concerns  and  the  big  steam- 
ship companies  do  discriminate  against  the  general  run  of  shippers, 
and  I  believe  this  bill  would  stop  that  very  thing  and  would  regulate 
the  shipping  on  the  seas  just  as  well  as  it  is  by  land. 

Mr.  Edmonds.  You  believe,  then,  they  ought  to  establish  positive 
rates  ? 

Mr.  Jacobs.  Yes,  sir.  I  think  no  one  is  going  to  object  if  every- 
body is  treated  alike;  but  I  am  opposed  to  this  discrimination  that 
gives  the  large  concerns  an  advantage  over  the  smaller  concerns. 

The  Chairman.  You  mean  in  the  way  of  rebates? 


54  REGULATOEY    FEATURES   OF    SHIPPING    BILL. 

Mr.  Jacobs.  Rebates,  yes;  various  tilings.  For  instance,  they  will 
establish  a  rate  and  they  will  say  it  is  the  rate  less  such  and  such  a 
percentage.  In  fact,  they  won't  oven  estabhsh  like  rates:  you  can 
not  tell  what  they  will  do,  they  do  not  tell  you;  but  we  know  in- 
tuitively that  some  of  the  shippers  do  o;et  the  inside  track. 

Mr.  Edmonds.  If  you  had  a  cargo  ship  and  a  man  came  to  you  and 
offered  to  fill  three-quarters  of  the  tonnage  of  that  ship  with  cargo, 
would  not  you  feel  hke  making  a  concession!' 

Mr.  Jacobs.  You  moan  if  he  bought  the  canned  goods  from  us? 

Mr.  Edmonds.  No;  I  am  not  talking  about  canned  goods.  Sup- 
pose you  owned  a  ship  and  I  come  to  you  and  say — it  is  a  5,000-ton 
ship  and  you  wanted  $1  a  ton  freight  to  some  point — "I  will  give 
you  4,000  tons  in  this  ship  if  you  will  take  it  at  90  cents." 

Mr.  Jacobs.  I  do  not  think  it  ought  to  be  done  any  different  than 
the  railroads  do  it;  the  same  rule  ought  to  apply  that  applies  to  the 
railroads.  We  might  ship  a  hundred  cars  of  goods  by  rail  and  get  no 
better  rate  than  the  man  v/ho  ships  one  car.  And  in  saying  this,  I 
may  be  talking  against  my  owii  interests,  because  we  have  hundreds 
of  cooperative  small  concerns  in  California  that  ship  just  a  few  cars 
of  goods,  and  before  the  regulation  of  the  freight  rates  they  were  put 
out  of  business.  I  know  California  was  just  full  of  canneries  put  out 
of  business  because  of  discriminations  in  railroad  rates.  And  I  was 
the  one  who  started  the  investigation  in  California  by  our  railroad 
commission  and  stopped  rebates  which  were  as  high  as  35  per  cent  in 
some  cases-^not  that  I  had  any  personal  interest  at  stake  at  all,  except 
the  interest  of  my  State. 

Mr.  Edmonds.  You  own  this  ship  again;  you  either  have  to  take 
that  4,000  tons  of  cargo  at  90  cents  or  take  4,000  tons  of  ballast  in 
the  ship  and  not  carry  any  cargo;  what  will  you  do?  There  is  no 
comparison  between  a  ship  and  a  railroad. 

Mr.  Jacobs.  If  there  was  no  regulation,  I  would  do  the  best  I  could. 

Mr.  Edmonds.  If  there  was  regulation,  you  would  go  out  and  lose 
money  by  operating  the  ship. 

Mr.  Jacobs.  Yes,  I  would  have  to  respect  the  law. 

Mr.  Edmonds.  Then  how  would  you  build  up  a  merchant  marine 
by  that  process? 

Mr.  Jacobs.  I  could  not  answer  that  question.  That  would  de- 
pend altogether  on  the  circumstances.  The  question  of  loss  by  run- 
ning an  American  merchant  marine  by  the  Government,  I  presume 
you  mean  ? 

Mr.  Edmonds.  1  am  not  talking  about  loss  to  the  Government;  I 
am  talking  about  building  up  a  merchant  marine;  that  is  what  we  are 
trying  to  do. 

Mr.  Jacobs.  I  do  not  know.  That  has  been  the  process  for  the 
last  40  years  and  you  have  not  built  up  a  merchant  marine  yet  in 
this  country;  you  have  had  that  method  for  40  years. 

Mr.  IIakdy]  Having  cutthroat  methods,  cutting  and  slashing, 
hauling  freight  entirelv  free  here,  and  for  a  big  price  there,  making 
up  on  th(^  little  man  what  you  lose  on  the  big  man,  has  that  ever 
resulted  in  buikling  up  any  kind  of  industry? 

Mr.  Jacobs.  I  do  not  think  it  has. 

Mr.  Hardy.  Now,  when  you  get  Mr.  Edmonds's  question,  strictly 
speaking,  to  leave  the  shippers  at  perfect  liberty  to  charge  as  they 
please,  to  give  the  big  man  low  rates  and  the  little  man  high  rates, 


REGULATORY    FEATURES    OP    SHIPPING    BILL.  55 

won't  that  in  every  case  absolutely  cut  the  throat  of  tlio  little  man  and 
leave  the  big  man  alone  ? 

Mr.  Jacobs.  That  is  exactly  what  the  effect  has  been  and  will  be. 

Mr.  Hardy.  That  has  been  the  result  of  such  methods  in  the  past  ? 

Mr.  Jacobs.  Yes,  sir. 

Mr.  Hardy.  Now  they  have,  as  a  whole,  the  same  trade;  and 
whether  it  is  carried  at  reasonable  rates  or  whether  it  is  carried  for 
nothing  to-day  and  two  prices  to-morrow,  these  ships  have  the  total 
amount  of  freight  to  carry  eventually? 

Mr.  Jacobs.  Yes. 

Mr.  Hardy.  And  if  they  simply  adopted  business  methods  they 
would  not  be  going  empty  or  in  ballast  ? 

Mr.  Jacobs.  We  believe  there  is  })usiness  enough  for  all,  like  any 
men  competing  with  each  other. 

Mr.  Hardy.  And  if  there  is  not,  somebody  has  got  to  retire  from 
business  ? 

Mr.  Jacobs.  Yes. 

Mr.  Hardy.  But  if  you  have  no  regulation  you  have  just  simply 
a  condition  of  chaos. 

Mr.  Jacobs.  That  is  true. 

Mr.  Greene.  What  do  you  do  in  your  canning  business  ?  Do  you 
have  a  settled  price  that  every  man  in  the  canning  business  on  a  case 
charges  the  same  price,  or  do  you  go  in  and  compete  ? 

Mi\  Jacobs.  We  do  not  have  any  settled  price.  We  go  in  and  com- 
pete; and  wliilc  I  can  not  say  I  am  going  to  speak  in  favor  of  settled 
prices,  I  know  that  the  result  is  terribly  disastrous. 

Mr.  Greene.  You  have  a  regular  cutthroat  business  in  your  line  ? 

Mr.  Jacobs.  It  is  a  regular  cutthroat  business.  At  the  present  time 
two-thirds  of  the  canners  of  California  are  not  making  a  dollar;  and 
we  would  not  make  a  dollar  ourselves  if  it  was  not  for  the  fact  we  have 
a  trade-mark  on  which  our  goods  are  sold  in  foreign  countries.  That 
is  why  we  liave  gone  into  the  foreign  trade  so  heavily.  As  I  explained 
before,  85  per  cent  of  our  business  is  in  foreign  markets,  because  we 
can  not  make  any  money  in  the  domestic  market.  On  account  of  the 
cutthroat  rules,  if  it  w^as  not  for  the  fact  we  have  our  trade-mark  estab- 
lished in  Europe,  that  the  people  over  there  want,  we  could  not  exist 
to-day. 

Mr.  Edmonds.  Do  you  sell  a  man  5,000  cases  for  the  same  price  that 
you  sell  5  cases  ? 

Mr.  Jacobs.  No,  sir;  we  do  not. 

Mr.  Edmonds.  You  make  a  different  price? 

Mr.  Jacobs.  Yes,  sir. 

Mr.  Greene.  As  to  the  effect  on  shipping  on  the  Pacific  coast,  as 
between  Vancouver  and  vSeattle,  for  instance,  how  far  would  this  bill 
regulate  the  rate  at  Vancouver  or  any  other  British  port  ? 

Mr.  Jacobs.  I  do  not  suppose  it  would  have  any  control  over  it 
if  they  did  not  touch  at  American  ports. 

Mr.  Greene.  But  they  have  that  competition,  do  they  not,  in 
Vancouver — they  have  the  competition  at  Vancouver  on  the  Pacific 
coast  ? 

Mr.  Jacobs.  Under  the  present  laws  ? 

Mr.  Greene.  Under  any  law;  even  if  we  get  this  law? 

-Mr.  Jacobs.  Under  the  law  I  do  not  believe  a  vessel  loading  at 
Vancouver  can  deliver  goods  to  an  American  port ;  I  do  not  believe 
it  can  load  there  and  deliver  goods. 


56  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Greene.  Suppose  they  are  brought  in  to  A'^aucouvor  and  de- 
Hvered  in  the  United  States  by  rail  ? 

Mr.  Hadley.  He  is  speaking  of  the  foreign  trade. 

Mr.  Greene.  Yes;  the  foreign  trade. 

Mr.  Jacobs.  A¥hat  regukition  woukl  that  be  ? 

Mr.  Greene.  Yes;  I  want  to  Ivuow  liow  far  this  bill  would  regulate 
the  business  at  Vancouver  which  would  come  in  competition  with 
Seattle  ? 

The  Chairman.  In  what  trade,  Mr.  Greene  ? 

Mr.  Greene.  In  any  trade.     Take  Australia,  for  instance. 

Mr.  Jacobs.  I  could  not  answer  that  question,  because  it  is  some- 
thing that  the  working  out  of  the  bill  would  have  to  prove  and 
demonstrate. 

Mr.  Greene.  I  thought  you  had  examined  the  bill  and  thought 
you  could  tell  me  whether  there  was  any  provision  in  this  biU. 

Mr.  Jacobs.  You  mean  in  this  biU  ? 

Mr.  Greene.  Yes;  this  bill. 

Mr.  Jacobs.  This  one  here  ? 

Mr.  Greene.  Any  bill;  I  do  not  care  whether  it  is  this  one  or  the 
other,  either  10500  or  14387,  or  any  other  bill — any  bill  that  would 
protect  American  men  in  business  as  vessel  owners  or  business  men 
as  against  the  competition  of  the  foreigner  in  l)usincss  right  adjoining 
them — whether  or  not  this  bill  would  be  of  any  advantage  at  all  to 
the  American  shipowner  or  the  American  shipper? 

Mr.  Jacobs.  I  do  not  know  that  it  would  be  of  any  more  advantage 
than  it  is  to  the  American  shipper  by  rail,  and  the  rail  rates  are  regu- 
lated. 

Mr.  Greene.  Oh,  but  that  is  cjuite  different;  on  the  land  you  have 
specific  places  to  run.  Here  on  the  ocean  you  are  going  out  on  a  free 
ocean.  And  what  I  want  to  ask  you  is  this:  The  regulations  in  this 
measure  are  very  much  different  from  the  regulations  anywhere  else; 
they  practically  tie  the  hands  of  the  American  shipper  and  tie  the 
feet  of  the  American  shipper;  he  can  not  do  this  and  he  can  not  do 
that  without  being  liable  to  prosecution  or  imprisonment,  and  he  can 
not  do  this  or  that;  and  yet  the  man  at  Vancouver  or  any  of  the 
British  ports  would  not  be  tied  in  that  way. 

The  Chairman.  At  this  point  I  want  to  state  that  this  bill  does  not 
do  anything  of  that  sort;  there  is  not  a  line  in  the  bill  that  would 
justify  any  such  statement  as  that. 

Mr.  Greene.  Read  the  bill;  anybody  who  can  read  can  see  that. 
I  can  read  and  you  can  read. 

The  Chairman,  I  am  quite  familiar  with  the  bill  and  there  is  no 
one  wlio  understands  it  who  would  venture  such  an  assertion  as  that. 

Mr.  Greene.  Then  I  am  thickheaded;  I  will  put  myself  down  as 
being  thickheaded,  although  I  do  not  think  I  am. 

The  Chairman.  Here  is  a  condition  that  I  do  not  believe  subsidies 
or  anything  else  would  meet.  For  instance,  if  a  line  from  Vancouver 
to  Australia  can  quote  a  rate  of  $1.50  a  hundred  on  lumber  or  $15  a 
thousand  on  lumber,  the  only  way  Seattle  could  compete  with  Van- 
couver would  be  by  giving  the  American  lumbermen  as  good  a  rate. 
Is  not  that  true  ? 

Mr.  Greene.  Yes;  that  would  be 

The  Chairman.  And  I  do  not  suppose  it  would  make  any  differ- 
ence, under  this  bill,  a  subsidy  bill,  or  any  other  bill. 


HKCiULATORV     KI'^ATUKKS    OF    SHIPPING    BILL.  57 

Mr.  Greenp:.  But  I  ain  in  favor  of  a  subsidy  to  cover  that,  and  you 
do  not  provide  it  here. 

The  Chairman.  I  do  not  care  how  much  you  would  subsidize  an 
American  merchant  marine,  it  would  not  affect  a  situation  hke  that. 
In  other  words  we  would  have  to  compote  just  as  we  do  in  transcon- 
tinental rates  on  the  railroads;  our  American  railroads  must  compete 
with  the  Canadian  railroads.  And  in  the  foreign  trade,  our  water 
shippers  must  have  just  as  low  a  rat(^  as  the  foreign  shipper. 

Mr.  Greene.  But  in  their  use  of  the  money  put  in  this  bill  to  build 
up  a  merchant  marine,  if  you  used  the  money  in  the  form  of  a  subsidy 
it  would  meet  the  difference. 

Mr.  Jacobs.  Except  to  this  extent,  that  under  this  bill  the  benefits 
would  go  to  the  manufacturers  and  producers  in  this  country  instead 
of  going  to  the  shipowners. 

Mr.  Greene.  It  does  not  make  any  difference  who  gets  it. 

Mr.  Jacobs.  I  think  it  makes  quite  a  difference. 

Mr.  Greene.  The  difference  goes  to  those  who  are  entitled  to  it; 
that  is  what  it  would  be  in  either  case. 

Mr.  Hardy.  Mr.  Jacobs,  you  were  asked  by  Mr.  Edmonds  a  minute 
ago  whether  you  had  one  price  for  5,000  cans  or  5  cans  of  goods  ? 

Mr.  Jacobs.  Yes. 

Mr.  Hardy.  Is  it  not  generally  recognized  there  is  a  big  difference 
between  a  private  producer  conducting  a  private  business  and  a 
quasi  public  institution  like  the  railroads,  whose  rates  and  dealings 
are  regulated  ? 

Mr.  Jacobs.  Yes,  sir. 

Mr.  Hardy.  Now,  you  would  not  be  in  favor  of  a  law,  nor  would 
anybody  I  know  of  be  in  favor  of  a  law,  that  would  prevent  you 
giving  drawbacks  to  customers  who  traded  with  you  for  a  whole 
year;  there  is  nothing  improper  in  your  case  with  that. 

Mr.  Jacobs.  No;  if  the  law  permitted  us. 

Mr.  Hardy.  As  a  matter  of  practice,  if  you  see  proper  to  induce 
a  man  to  trade  with  you  during  all  the  year  by  giving  him  back  10 
per  cent,  you  can  ? 

Mr.  Jacobs.  I  think  there  is  a  law  that  prevents  that  now  unless 
we  do  it  with  all  similar  customers. 

Mr.  Hardy.  Do  it  with  all  customers.  That  is  not  the  kind  of 
little  drawback  down  in  South  America  we  are  complaining  of;  that 
is  a  very  different  thing — a  drawback  from  a  line  and  in  your  indi- 
vidual trade — is  it  not  ? 

Mr.  Jacobs.  Your  question  before  would  probably  answer  that. 
I  will  explain  the  situation  in  the  canning  bushiess  in  California 
to-day.  In  selling  goods,  one  man  will  go  out  and  give  all  the  way 
from  5  to  20  per  cent  private  discounts  to  buyers;  and  the  result  is 
if  it  is  a  customer  of  somebody  else,  they  will  give  20  per  cent,  be- 
lieving that  they  can  do  a  portion  of  the  business  at  a  loss.  Some  of 
our  concerns  will  do  that  in  order  to  get  away  somebody  else's  cus- 
tomers.    And  the  result  is  nobody  is  able  to  make  any  money. 

Mr.  Hardy.  Now  that  conduct  has  been  charged  up  particularly 
to  the  Standard  Oil  people  in  the  sale  of  oil,  to  drive  out  competion, 
and  there  has  been  a  good  deal  of  agitation  for  a  law  and  in  some 
States  a  law  has  been  passed  requiring  the  big  producer  to  have  a 
uniform  price  and  if  they  cut  the  price  to  drive  out  competition  in 
one  place  they  are  required  to  do  it  elsewhere.     Those  are  special 


58  REGULATORY  FRATURKR  OF  SHTPPTNO  BTI.L. 

illustrations  of  special  attempts  to  curb  the  power  of  stupendous 
capital.  It  has  not  been  applied  to  the  small  individuals  or  small 
enterprises,  as  far  as  I  know,  but  this  question  of  railroad  regulation 
and  ship  regulation  is  the  regulation  of  quasi  public  carriers — at 
least  quasi  public. 

Mr.  Jacobs.  On  which  the  backbone  of  our  country  (k^pends  to-day. 

Mr.  Hardy.  And  if  you  do  not  control  thenx  they  beconie  an 
"uncontrollable  monopoly.  So  it  is  a  very  different  question  wlien 
they  ask  you  about  canned  goods  and  ships. 

Mr.  Jacobs.  I  think  so. 

Mr.  Edmonds.  That  might  be  true  as  far  as  corporation  lines  are 
concerned,  but  I  do  not  think  that  would  be  true  as  far  as  a  private 
individual  owning  one  or  two  boats. 

Mr.  Hardy.  I  think  you  will  find,  Mr.  Edmonds,  in  the  case  of 
the  public  lines,  according  to  our  investigation,  which  you  remember, 
th?i  individual  tramji  steamer  did  not  have  much  show  to  live  if  they 
set  out  to  kill  him. 

Ml'.  Edmonds.  I  think  3^our  statement  regarding  a  quasi  public 
service  might  be  true  as  to  the  lines  of  a  single  carrier.  This  gentleman 
is  performing  a  quasi  public  service  in  taking  products  and  canning 
them. 

Ml*.  Hardy.  Are  you  opposed  to  all  regulation  ? 

Mr.  Edmonds.  I  am  simply  saying  Mr.  Jacobs  does  not  know  what 
this  bill  is. 

Mr.  Hardy.  That  is  not  a  question;  that  is  argument. 

Mr.  Edmonds.  He  says  he  wants  freight  rates  positively  settled. 

Ml".  Jacobs.  Yes,  sir. 

Mr.  Edmonds.  The  bill  does  not  positively  settle  freight  rates. 

The  Chairman.  I  think  he  is  wrong  about  that. 

Mr.  Jacobs.  You  mean  this  last  bill,  this  one  I  read  to-day.  It 
prevents  discriminations;  that  is  the  principal  thing  and  I  think  that 
is  a  very  wise  provision. 

Mi\  Hardy.  Yes;  and  it  allows  the  board  to  fix  reasonable  rates 
where  they  have  been  oppressive. 

Mr.  Jacobs.  If  it  does  not  settle  the  rates  positively,  possibly 
that  is  just  as  well.  I  think  it  is  just  as  well  if  it  does  not,  if  it  will 
prevent  discriminations;  that  is  the  important  thing,  so  that  people 
will  know  what  they  are  paying  and  that  they  arc  not  being  dis- 
criminated against. 

The  Chairman.  We  sent  out,  when  we  were  investigating  the  so- 
called  Shipping  Trust  under  House  resolution  587,  some  2,500  or 
3,000  letters,  principally  to  merchants,  exporters,  and  importers  on 
the  Atlantic,  Pacific,  and  Gulf.  Their  answers  were  confidential, 
and  we  classified  and  discussed  them  in  our  report.  And  that  is 
'One  of  the  things  they  said,  that  they  did  not  know  in  some  instances 
whether  they  were  really  being  discriminated  against  or  not,  but 
they  had  reason  to  belie v^e  they  were  and  they  wanted  it  stopped. 
So  far  as  everybody  being  treated  alike — so  far  as  that  question  was 
concerned— they  did  not  complain.  In  other  words,  it  was  just  like 
it  used  to  be  with  the  railroads,  when  rebates  were  granted  to  the 
big  shippers  and  the  little  shipper  did  not  get  those  favors.  Now  it 
is  prohibited  on  the  railroads  and  I  assume  that  we  would  he  glad  if 
the  same  thing  was  true  on  our  water-borne  commerce. 

Mr.  Edmonds.  We  asked  an  association  I  belong  to  in  Philadelphia 
once  whether  the  members  did  not  think  they  were  l^eing  discrim- 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  59 

iiiated  against  by  the  wholesalers  and  every  member  said  he  thought 
he  was,  but  he  could  not  put  his  finger  on  it;  just  exactly  as  they  tell 
you  about  shipping. 

"Mr.  Hardy.  Don't  you  think  they  were  right  ? 

Mr.  Edmonds.  I  haven't  the  least  bit  of  doubt  some  fellow  got  it 
on  some  line  where  another  fellow  got  it  on  another. 

^fr.  Greene.  How  many  canning  companies  are  there  on  the 
Pacific  coast  ? 

Mr.  Jacobs.  There  are  8  or  10  large  concerns  and  probably  30  or 
35  smaller  concerns. 

Mr.  Greene.  How  long  has  yours  been  a  large  concern? 

Mr.  Jacobs.  We  are  the  largest  concern  in  existonco  in  California 
and  we  would  have  been  out  of  business  long  ago  if  it  was  not  for  our 
trade-mark. 

Mr.  Hadley.  The  canneries  you  speak  of  are  the  fruit  and  vegetable 
canriers? 

Mr.  Jacobs.  Yes.  We  have  been  in  business  since  1880,  our  con- 
i'eni.     I  went  in  there  in  1880,  35  years  ago  the  1st  of  February. 

Mr.  Greene.  How  do  these  other  people  in  the  business  live;  have 
they  trade-marks,  like  yourself  ? 

Mr.  Jacobs.  No,  sir, 

■  Mr.  Greene.  How^  do  they  manage? 

Mr.  Jacobs.  They  don't  manage.  The  small  concerns  keep  start- 
ing up  and  going  out  every  year.  Half  a  dozen  concerns  start  up 
eivery  year,  aiui  are  wiped  right  out.  The  farmers  contribute  capital 
to  them  and  at  the  end  of  the  year  it  is  all  gone.  Sometimes  they 
contribute  for  two  years  and  then  wind  up  and  assess  the  farmers  for 
for  their  loss  and  the  machinery  is  broken  up. 

Mr.  Greene.  Why  do  the  farmers  do  that  ?  Do  you  offer  so  low  a 
price  for  their  products  they  can  not  afford  to  sell  to  you  ? 

Mr.  Jacobs.  Sometimes  I  imagine  that  is  the  case;  or  they  find  they 
can  do  better  by  selling  themselves. 

Mr.  Greene.  You  run  a  combination  of  farmers 

Mr.  Jacobs.  We  haven't  any  combination. 

Mr.  Greene.  A  quasi  public  corporation  formed  for  the  benefit  of 
the  people,  and  you  want  the  Government  to  benefit  the  people  ? 

Mr.  Jacobs.  We  have  no  combination. 

Mr.  Edmonds.  I  think  I  wall  take  up  that  bill  of  mine  for  having 
Government  canneries. 

Mr.  Jacobs.  The  smaller  concerns  are  up  against  it  on  a  great 
many  propositions.  Formerly  they  were  up  against  high  railroad 
rates — the  little  concerns  in  the  State — then  again  they  are  up  against 
the  special  discounts,  as  I  was  telling  you,  and  they  operate  so  that 
the  small  concerns  without  a  reputation  for  their  goods  can  not  sell 
them. 

■  Mr.  Greene.  Do  you  make  any  special  discounts '( 

Mr.  Jacobs.  Certainly  we  do.  We  have  to  or  we  would  not  bo 
in  business.     W^e  don't  want  to  do  it,  though. 

Mr.  Greene.  I  thought  you  carried  on  a  high  plane  of  morahty 
and  justice. 

Mr.  Jacobs.  Tlie  Federal  Trade  Commission  is  in  San  Francisco 
now,  at  least,  I  saw  their  representative  from  Washington — I  have 
his  card  here — who  was  investigating  that  very  thing.  He  came  to 
me,  and  I  said,  ''There  are  the  books;  3^ou  can  go  at  them  and  satisfy 


60  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

yourself."  But  he  asked  me  whether  we  were  giving  special  dis- 
counts, and  I  said  why  certainly  we  were,  because  others  were  doing 
the  same  thing,  and  we  had  to  do  it  or  lose  our  trade.  I  will  tell  you 
we  lost  customers  we  had  for  25  years,  even  for  this  special  trade- 
mark, because  they  had  been  oflFered  the  goods  by  some  of  our 
competitors  at  a  price  and  special  discounts  away  below  what  we 
could  afford  to  pack  the  goods  for,  and  we  just  lost  the  business. 

Mr.  Edmonds.  We  are  trying  to  got  out  a  bill  that  will  take  care 
of  our  merchant  marine  without  injuring  business;  that  is  what  we 
are  hunting  for. 
Mr.  Jacobs.  Yes. 

Mr.  Edmonds.  The  same  class  of  competition  met  in  the  canning 
business  is  met  here,  and  therefore  when  we  get  out  a  bill  we  must 
get  it  in  such  shape  that  it  won't  injure  tlie  merchant  marine. 

Mr.  Jacobs.  You  do  not  think  a  subsidy  is  going  to  regulate  that 
at  all?  It  will  just  help  make  some  of  those  steamship  owners  get 
more  than  they  are  getting  now. 

Mr.  Greene.  What  are  you  going  to  do  with  this  $50,000,000  in 
the  bill? 

Mr.  Jacobs.  I  believe  if  the  whole  $50,000,000  is  lost  and  you  can 
get  an  American  merchant  marine  that  will  open  up  opportunities 
to  the  markets  of  the  world,  it  will  be  worth  $200,000  a  year  to  this 
country,  even  if  you  lost  $50,000,000  a  year  in  doing  it.  You  may 
call  that  a  subsidy,  but  it  is  of  some  value  to  the  business  interests 
of  this  country;  whereas  a  subsidy  to  the  steamship  owners  I  do 
not  believe  would  be  of  any  value  to  the  business  interests  of  the 
country. 

Mr.  Greene.  Of  course,  that  has  not  been  decided;  that  is  a  new 
idea  and  has  not  been  decided. 

Mr.  Hadley.  "V^Hiere  are  your  principal  markets? 
Mr.  Jacobs.  In  England. 

Mr.  Hadley.  And  who  are  your  principal  competitors  ?     Have  you 
any  foreign  competitors  in  the  same  markets  ? 
Mr.  Jacobs.  Oh,  yes. 

Mr.  Hadley.  Where  are  they  located  principally? 
Mr.  Jacobs.  In  California. 
Mr.  Hadley.  I  mean  foreign  competitors. 

Mr.  Jacobs.  Oh,  we  have  foreign  competitors  in  the  Enghsh  mar- 
ket; but  of  course  we  have  a  preference  because  we  have  a  trade-mark 
that  they  want;  otherwise  we  would  be  out  of  business. 

Mr.  Greene.  Wliat  is  the  nature  of  your  trade-mark;  what  is  its 
value  ? 

Mr.  Jacobs.  It  has  been  in  existence  for  over  35  years,  since  we 
started  in  1880;  and  the  English  people  when  they  start  in  buying  any- 
thing that  is  satisfactory  to  them,  you  can  not  get  them  to  change, 
that  is  all  —like  any  other  business.  And  we  can  get  living  prices 
out  of  those  goods;  we  do  not  have  to  meet  that  kind  of  competition 
we  arc  confronted  with  in  this  country  as  the  most  of  them  have  to 
meet  it. 

The  Chairman.  We  are  very  much  obliged  to  you,  Mr.  Jacobs,  for. 
appearing. 

(Thereupon,  at  3  o'clock  p.  m.,  the  committee  adjourned  until 
Tuesday,  April  18,  1916,  at  10  o'clock  a.  m.) 


REGULATORY    FEATURES    OF    SHIPPING    BILL,  61 

COMMITTKK   ON    THE   MERCHANT  MaRINE  AND    FISHERIES, 

House  of  Representatives, 
W asMngton,  D.  6'.,  Tuesday^  April  18,  1916. 

The  committee  met  at  10  o'clock  a.  m.,  Hon.  Joshua  W.  Alexander 
(chairman)  presiding. 

The  Chairman.  The  hearing  to-day  is  set  at  the  request  of  the 
representatives  of  the  Chamber  of  Commerce  of  New  York  on  H.  li. 
14o37,  Avhich  the  ctnnmittee  has  under  consideration,  which  it  is  sug- 
gested be  substituted  for  the  provisions  of  sections  9  and  10  of 
H.  R.  10500. 

Who  will  be  heard  first? 

STATEMENT   OF  MR.  IRVING   T.   BUSH,    OF  NEW   YORK,    N.    Y., 
PRESIDENT  OF  THE  BUSH  TERMINAL  CO. 

Mr,  Bush.  I  will  speak  first  and  introduce  the  other  speakers. 

The  Chatr^ian.  Who  else  will  speak? 

Mr.  Bush,  Mr.  Franklin  will  be  the  second  speaker,  Mr.  Sherman 
will  be  the  third,  and  Mr,  George  S,  Dearborn  will  be  the  fourth, 
Mr.  Dearborn  will  be  followed  by  Mr.  Kirlin. 

The  Chairman.  You  may  proceed, 

Mr,  Bush.  Mr,  Chairman  and  gentlemen,  I  wish  to  make  one  or 
two  points  clear  at  the  beginning  of  our  testimony.  Tlie  committee 
of  which  I  am  chairman  of  the  Chamber  of  Commerce  of  New 
York  is  empowered  only  to  speak  upon  shipping  matters  pertaining 
to  the  foreign  trade. 

In  bill  H,  R,  14337,  which  is  before  us  to-day,  there  are  a  number 
of  sections  which  will  apply,  if  passed,  to  the  interstate  trade,  but 
our  committee,  as  a  whole,  will  have  nothing  to  say  upon  those  sec- 
tions, because  we  are  not  empowered  by  the  chamber  of  commerce 
to  speak  upon  them. 

Mr.  George  S.  Dearborn,  president  of  the  ^American-Hawaiian 
Steamship  Co.,  who  is  a  member  of  oiu-  committee,  will  speak  in  his 
turn,  as  an  individual,  and  as  the  president  of  his  company,  upon 
those  sections. 

I  also  wish  to  make  it  clear  that  in  appearing  and  giving  our  sug- 
gestions upon  this  bill,  we  have  not  changed  our  views  as  to  the 
desirability  of  the  measure  which  was  introduced  by  Mr.  Rowe 
and  which  was  prepared  by  the  Chamber  of  Commerce  of  the  State 
of  New  York,  or  of  the  desirability  of  the  suggestions  which  were 
submitted  by  Mr.  Kirlin,  who  is  counsel  to  our  committee. 

As  to  the  substitution  for  the  regulatory  provisions  in  House  bill 
10500,  we  have  prepared  here  a  number  of  suggestions,  amounting 
to  about  21,  which,  for  the  purpose  of  the  record,  I  will  introduce, 
but  I  will  not  attempt  to  speak  upon  more  than  three  of  them,  the 
three  which  we  consider  fundamental;  and  leave  to  Mr.  Kirlin, 
when  he  speaks,  the  duty  of  describing  the  other  changes.  Many  of 
the  changes  are  technical  in  nature  (the  introduction  of  a  work  or 
the  substitution  of  a  phrase)  and  he,  in  his  turn,  will  point  out  the 
reasons  why  the  changes  are  suggested. 

Before  speaking  of  the  three  fundamental  ])oints  which  I  have  in 
mind,  I  would  like  to  say,  as  I  am  very  sure  has  occurred  to  the 
mind  of  everyone  here,  that  we  are  making  history  very  rapidly  in 


62  llEGULATOKY    FEAJ  UKES    OF    SiilPPiNG    BILL. 

shipping  matters,  and  the  point  of  view  of  our  committee  would, 
perhaps,  be  different  to-da}^  if  we  had  commenced  to  study  this 
problem  previous  to  two  years  ago  when  we  first  undertook  the  work. 
At  that  time  Ave  were  profoundly  convinced  that  it  was  necessary 
to  offer  some  inducements  to  American  capital  to  invest  in  American 
vessels;  but  the  wealth  of  this  country  has  been  added  to  so  rapidly 
by  the  enormous  exports  during  the  war  and  by  the  splendid  eco- 
nomic conditions  of  the  country  that,  instead  of  needing  any  great 
inducement  to  American  capital  to  go  into  the  construction  of  Ameri- 
can flag  ships,  it  has  seemed  to  us  that  it  would  be  sufficient  to  have 
a  general  air  of  encouragement  surround  the  shipping  business. 
And  even  that  view  has  been  changed  by  some  of  the  members  of 
our  committee. 

And  while  I  am  not  empowered  to  say  this  for  our  committee,  I 
have  heard  a  great  manv  experienced  and  important  steamship  men 
say  that  at  the  present  time  the  condition  has  so  changed  that  if  no 
legislation  could  be  enacted  they  believe  the  shipping  problem  would 
take  care  of  itself.  It  is  perhaps  my  own  view  that  the  condition  has 
so  changed  that  instead  of  needing  an  inducement  to  American  capital 
to  go  into  the  construction  of  American-flag  ships  on  the  basis  of  a 
friendly  attitude  on  the  part  of  the  Government,  that  it  will  be 
sufficient  to  have  an  attitude  which  the  steamship  men  would  in- 
terpret as  not  unfriendly.  I  do  not  use  that  phrase  in  any  sense 
which  could  be  objected  to  by  any  man  here,  for  we  are  perfectly 
certain  that  every  member  of  your  committee  is  entirely  friendly  to 
an  American  merchant  marine;  but  it  is  a  question  of  what  the 
steamship  man  or  possible  investor  in  a  steamship  property  would 
consider  as  possibly  unfriendly  to  his  investment  when  made.  And 
it  is  our  fear  that  something  may  be  done  by  Congress  which  will 
have  a  deterrent  effect  in  preventing  us  from  taking  advantage  of 
this  first  gi-eat  opportunity  Avhich  we  have  had,  really,  to  do  some- 
thing substantial  and  constructive  toward  putting  on  the  great 
high  seas  a  merchant  marine  under  the  American  flag  which  has 
caused  us  to  scrutinize  with  such  great  care  all  of  the  provisions  in 
this  bill  which  we  are  considering  to-day. 

The  deterrent  force  which  is  operating,  it  seems  to  me,  both  on  this 
side  of  the  water  and  on  the  other  side,  toward  building  up  a 
merchant  marine  either  under  our  own  flag  or  the  flags  of  the  great 
belligerent  powers,  is  fear.  On  the  other  side  they  fear  the  after- 
math of  the  war  and  the  great  burden  of  taxation  which  may  be 
placed  upon  that  property  there.  And  the  P]nglishman  or  any  of  the 
belligerent  investors  in  ship  property  who  considers  putting  his 
money  into  vessels  at  the  present  time  faces  the  jn-oblem  of  what 
the  burden  of  taxation  is  going  to  be  to  him  as  a  vessel  owner  after 
the  M'ar  is  over.  That  may  be  a  source  of  comfort  to  us  on  this  side 
of  the  water,  because  any  additional  burden  of  expense,  whether 
operating  cost  or  taxation  expense,  is  another  step  toward  equaliza- 
tion of  operating  cost  which  we,  as  a  committee,  feel  is  essential 
before  anything  constructive  or  permanent  is  done  in  the  upbuilding 
of  our  merchant  marine. 

On  this  side  of  the  water  the  man  Avho  is  considering  investing 
money  in  vessel  property  is  confronted  also  with  fear,  and  the  fear 
is  the  uncertainty  of  possible  Government  competition,  and  also 
the  uncertaintv  of  the  danger  of  competition  which  he  must  face 


REGULATORY    FEATURES    OF    SHIPPING    BILL,  63 

when,  after  the  war  is  o\ev  and  the  great  tonnage  which  is  now 
used  for  naval  and  military  purposes  comes  back  into  the  world  com- 
petition. And  it  is  not,  gentlemen,  it  seems  to  me,  the  question  of 
what  is  the  intent  in  your  mind,  for  we  are  convinced  that  your  in- 
tention is  to  do  everything  possible  to  stimulate  the  upbuilding  of  a 
merchant  marine,  but  it  is  a  question  of  what  is  in  the  mind  of  the 
man  who  stands  upon  the  threshold  of  possible  investment  in 
American  tonnage  and  is  deciding  for  himself  the  question  of 
whether  or  not  he  shall  invest  his  money  in  a  steamship  property. 

I  think  my  own  case  may  be  a  fair  statement  of  the  mind  of  the 
average  investor.  At  the  present  time  I  have  not  any  investment  in 
vessel  property,  although  I  ha^e  been  closely  associated  with  vessel 
owners  and  the  shipping  business.  I  have  considered  a  number  of 
times  during  the  past  year  wdiether  I  should  invest  some  money, 
which  I  was  fortunately  in  a  position  to  do,  in  a  steamship  property. 
But  I  have  yet  no  interest  in  that  class  of  property,  and  I  know,  in 
my  own  case — and  I  say  it  with  perfect  sincerity — that  the  deterrent 
force  has  been  the  fear— or  lack  of  knowledge,  at  least — of  what 
the  Government  was  going  to  do  in  the  way  of  regulating  the  rates 
and  the  possibility  of  Government  competition  with  privately  owned 
steamship  property. 

When  the  Alexander  bill  was  introduced  in  the  last  Congress,  the 
gentlemen  whose  names  were  most  closely  associated  with  the  meas- 
ure made  repeated  utterances  to  the  effect  that  the  reason  it  was  neces- 
sary that  the  Government  go  into  the  ownership  and  operation  of 
vessel  property  was  because  private  capital  was  doing  nothing;  and, 
as  I  had  the  privilege  of  pointing  out  to  your  committee,  at  that  time 
private  capital  was  doing  nothing  in  any  line  of  business;  private 
capital  was  paralyzed.  But  since  that  time  the  country  has  become 
more  confident  of  the  future  and  private  capital  has  become  active 
in  all  lines,  and  it  has  for  the  first  time  taken  an  interest  in  the  de- 
velopment of  ship  property;  private  capital  has  filled  the  shipyards 
of  this  country  with  orders  for  merchant  vessels.  And  it  seems  to  me 
that  the  arguments  which  were  advanced  then  for  the  Government 
ownership  and  operation  have  ceased  to  be  of  force  at  the  moment, 
and  I  wonder  sometimes  very  seriously  whether  this  is  not  a  time  for 
us  all  to  stop,  look,  and  listen,  foi-  the  Government  to  consider 
whethei-  the  premises  upon  which  we  began  the  investigation  of  this 
great  subject  two  years  ago  have  not  so  radically  changed  that  the 
country,  as  a  Avhole,  will  be  better  off  if  our  own  bill,  formulated  by 
the  chamber  of  commerce,  is  not  torn  up  and  the  Alexander  meas- 
ure is  torn  up  and  the  development  of  the  merchant  marine  left  to 
work  out  its  own  destiny  until  we  can  see  more  clearly  what  is 
needed. 

I  wish  to  say,  however,  we  stand  absolutely  l)ehind  ovir  own  meas- 
ure because  we  believe  that  is  absolutely  automatic;  that  if  condi- 
tions equalize  themselves,  as  it  seems  probably  they  may  to  a  very 
large  degree,  the  operation  of  our  bill  absolutely  ceases,  and  it  is 
only  called  into  effect  again  when  a  difference  in  operating  costs 
arises.  It  is  not  like  an  ordinary  sul)sidy,  where  the  subsidy  is  paid 
irres])ective  of  whether  there  is  a  difference  in  operating  ccst  or  not. 
It  would  only  be  paid  when  there  is  a  difference  in  the  operating 
cost.  And  if  my  thought  is  at  all  correct  that  the  burden  of  taxation 
on  vessel  properties  owned  by  the  great  belligerent  nations  is  to  be 


64  KEGULATORY    FEATURES    OF    SHIPPING    BILL. 

heavy  after  the  war,  it  would  seem  to  me  there  may  be  a  very  great 
probability  that  the  increased  taxes  of  Europe  will  to  a  very  large 
degree,  perhaps  entirely,  offset  the  increased  operating  costs  of  vessel 
property  in  this  country,  which  our  investigations  showed  were  not 
so  great  as  is  sometimes  supposed. 

I  will  speak  very  briefly  of  the  three  fundamental  suggestions 
which  I  am  to  cover  in  my  statement,  and  then  I  will  introduce  Mr. 
Franklin  as  the  next  speaker,  and  leaving  to  JSIr.  Kirlin  the  covering 
of  the  detailed  suggestions  which  are  to  follow. 

The  first  thought  wdiich  I  wish  to  advance,  or  the  first  suggestion, 
is  that  there  seems  to  be  running  all  through  this  bill,  a  power  of 
investigation  without  any  sworn  complaint  having  been  filed. 

The  burdens  of  ordinary  business  are  sufficiently  great  to  encounter 
for  the  business  man  who  is  struggling  for  success,  without  having 
hanging  over  his  head  an  investigation  of  all  of  his  pl'ivate  affairs 
being  started  because  of  the  whispered  comment  of  somebody  who 
may  have  some  particular  grudge  against  his  business.  That  power 
vested  in  a  commission  of  this  kind,  wdiich  can  start  an  investigation 
which  will  not  only  take  a  great  deal  of  his  time,  but  which  might 
reveal,  unfortunately^  for  him,  a  great  many  of  his  business  secrets 
which  are  properly  kept  in  the  confidence  of  his  own  office.  We  be- 
lieve no  investigation  should  be  started  Avithout  a  sworn  complaint 
of  somebody  who  has  a  real  interest  in  the  matter.  We  do  not  think 
that  it  is  within  the  province  of  the  Government  or  within  the  prov- 
ince of  a  commission  of  this  kind  to  aid  in  an  introduction  of  trivial 
complaints;  that  if  a  man  has  had  an  injustice  done  him,  that  that 
injustice  should  be  corrected,  but  if  he  has  not  sufficient  courage  or 
not  sufficient  interest  in  the  matter  to  file  a  sworn  complaint  which 
wdll  definitely  state  his  grounds  for  complaint,  we  do  not  think  he 
should  be  considered.  A  man  in  beginning  an  ordinary  acti(  n  in 
civil  litigation  has  to  swear  to  his  complaint,  and  we  do  not  think 
that  the  trivial  complaint,  the  half-whispered  insinuations  which 
would  sometimes  start  a  Government  investigation,  should  be  en- 
couraged by  a  board  of  this  kind.  We  therefore  believe  and  hope 
that  your  committee  will  take  the  view  that  the  power  to  start  an 
investigation  Avithout  a  sworn  complaint  should  be  eliminated  from 
the  bill. 

The  Chairman.  You  mean  to  say  that  the  board  should  not  have 
the  power  to  start  this  investigation  on  their  own  initiative? 

Mr.  Bush.  We  do  not  think  the  board  should  have  the  power  to 
start  an  investigation  unless  a  sworn  complaint  has  been  filed. 

The  Chairman.  These  provisions  are  taken  in  turn  from  the  in- 
terstate-commerce law.  Ts  that  power  abused  now  by  the  Interstate 
Commerce  Commission  ? 

Mr.  Bush.  I  am  not  in  a  position  to  say  whether  it  is  abused  or  not. 

The  Chaikaian.  The  exact  language  of  the  intei'state-commerce 
law  as  to  the  power  vested  in  this  board  is  the  power  now  vested  in 
the  Interstate  Commerce  Commission. 

Mr.  Bush.  I  am  not  sufficiently  familiar  with  the  intei-state- 
commerce  law  to,  perhaps,  discuss  that  intelligently.  But  we  be- 
lieve there  is  a  very  great  difference  between  regulations  which 
should  surround  interstate  commerce,  where  it  is  entirely  without  our 
own  country  and  where  the  entire  control  is  vested  in  the  Interstate 
Commerce  Commission  and  regulations  whicli  should  surround  ocean 


REGULATOKV    FKATURES    OF    SHIPPING    RILL.  65 

shippiiio;  which  is  not  within  the  confines  of  our  borders  and  not  even 
within  the  ownership  of  our  own  people.  And  while  I  would  prefer 
not  to  be  drawn  into  a  discussion  of  the  interstate-commerce  act,  with 
which  I  am  not  familiar  in  detail,  we  do  maintain  it  is  sufficient  at 
the  present  time  to  su<!;<;est  that  your  ship  industry  is  not  developed 
and  built  up  as  is  the  case  with  the  railroads,  and  you  are  trying  to 
frame  laws  which  will  encourage  the  development  and  building  up 
of  our  merchant  marine.  And  until  that  has  been  accomplished  and 
until  we  have  a  merchant  marine  on  the  high  seas  and  until  it  has 
been  demonstrated  that  there  is  a  necessity  for  regulation  of  this 
character,  we  believe  it  will  be  more  helpful — and  we  believe  that  is 
the  aim  of  this  committee — if  it  is  said  to  the  man  who  is  investing 
money  in  steamship  ])roperty  that  he  is  not  going  to  take  the  chance  of 
having  all  his  private  affairs  investigated  at  any  time  upon  the 
initiative  of  this  commission,  and  that  they  can  only  be  investigated 
and  brought  into  the  public  light  if  some  one  takes  a  sufficiently 
definite  interest  in  them  to  come  forward  with  a  sworn  complaint 
that  he  has  done  something  that  requires  investigation.  And  if  that 
is  done,  we  believe  he  should  be  investigated. 

The  second  subject  which  1  shall  cover  is  the  matter  of  regulation 
of  rates.  We  do  not  believe  this  commission  should  be  given  the 
power  to  regulate  rates  excei)t  to  the  extent  of  the  prohibition  of 
unfair  practices.  We  believe  it  is  impossible  to  regulate  rates  with 
any  degree  of  fairness.  It  may  be  that  this  committe  has  within  its 
knowledge  some  facts  of  which  we  are  not  in  possession,  but  the 
steamship  men  who  are  a  part  of  our  committe  fail  to  se  any  way  in 
which  a  fair  rate  can  be  established  by  a  commission  of  this  charac- 
ter. The  character  of  vessels  differs;  their  costs  differ,  and  the 
rate  which  might  be  established  for  one  class  of  vessels  would  be 
entirely  improper  for  another. 

Vessels  which  were  constructed  before  the  war  cost  perhaps  $40 
or  $50  per  ton:  some  of  the  vessels  which  are  constructed  to-day  will 
cost  $150  a  ton:  and  if  you  are  going  to  base  your  rates  upon  the 
earning  power  of  a  vessl  it  would  manifestly  be  unfair  to  establish 
the  same  rate  on  the  vessel  which  cost  $40  a  ton  and  the  vessel  which 
cost  $150. 

Vessels  are  built  to  carry  different  kinds  of  cargo;  some  are  built 
to  carrv  heavy  cargo,  some  light  cargoes,  and  they  are  entirely  dif- 
ferent. And  "we  fail  to  se  how  it  is  possible  for  any  counnission  to 
regulate  with  any  degree  of  fairness  rates  of  that  character,  and  we 
believe  that  the  welfare  of  the  people.  Avhich  is  the  first  consideration, 
is  sufficiently  safeguarded  by  a  provision  which  gives  the  board  the 
power  to  prohibit  any  unfair  practices  and  to  say  that  they  can 
collect  a  fine  from  any  one  who  is  guilty  of  unfair  practices. 

Mr.  Saunders.  AVe  appreciate  the  force  of  what  you  say.  AVhat 
particular  provision  of  the  bill  do  you  have  in  mind  that  would 
bring  about  those  results? 

Mr.  Bush.  We  have  drawn  here  a  short  section— — 

Mr.  Saunders.  No;  I  mean  to  Avhat  particular  section  of  the  bill 
do  your  remarks  refer? 

Mr.  Bush.  As  I  was  about  to  say,  we  have  drawn  here  a  short 
section  to  take  the  place  of  sections  4  and  5  of  y<mr  bill. 

38534—16 5 


66  REGTJLATOEY   FEATURES   OP   SHIPPING   BILL. 

The  Chairman.  Mr.  Saunders  would  like  you  to  point  out  in  sec- 
tions 4  and  5  where  this  would  happen. 

Mr.  Saunders.  You  indicated  there  was  a  possibility  of  trouble  ? 

Mr.  Bush.  Yes. 

Mr.  Saunders.  Is  there  an,ything  in  oui-  hill  to  create  tlie  situation 
which  you  indicate? 

]\[r.  Busir.  I  think  there  is.  AVe  will  turn  to  section  5.  if  you 
please,  on  page  0.     It  provides  in  your  bill — 

Tlmr  wlienever.  nfter  full  hearings  ui""i  si  coinplaiiu.  or  under  an  order  for 
i n vest i. nation  made  by  tlie  l>o;ird  on  its  own  iuiriarive.  tlie  hoard  sludl  he  of 
(ipiuiou  that  any  rates  or  charjj;es  deuiaiided,  charj;ed,  or  colected  hy  any  com- 
mon carrier  l)y  water  in  foreijrn  commerce  are  unreasonahjy  high,  or  unjustly 
discrlDiinatory  between  shippers  or  ports,  or  unjustly  i)rejudicial  to  exporters 
of  the  United  States  as  compared  with  their  foreign  competitors,  or  represent 
an  unjust  relation  between  classes  of  commodities,  the  board  is  herel)y  em- 
I'owered  to  determine  and  prescribe  ^^■hat  shall  l)e  the  just  and  reasonable  rates 
and  charges  to  be  thereafter  observed  as  the  maxinnnn  to  be  charged,  and  to 
make  an  order  that  such  carrier  shall  cease  and  desist  from  publishing,  de- 
manding, or  collecting  any  I'ate  or  charge  in  excess  of  the  prescribed  maxi- 
nnnn, etc. 

I  won't  read  the  whole  section,  because  I  think  I  can  make  our  point 
clear  already.  We  believe,  in  the  first  place,  that  beginning  again  at 
section  5,  that  whenever,  after  full  hearing  upon  a  sworn  complaint. 
AVe  believe,  for  the  reason  which  I  have  already  stated,  that  a  man 
who  makes  a  complaint  should  make  it  in  public  and  swear  to  his 
complaint. 

Then,  we  prefer  to  strike  out  "  or  under  an  order  for  in\estigation 
made  by  the  board  on  its  own  initiative,"  for  the  reason  which  I  have 
alread}''  given.     And  then  we  continue : 

*  *  *  the  board  shall  be  of  opinion  that  any  rates  or  charges  demanded, 
chai-ged.  or  collected  by  any  common  carrier  by  water  in  foreign  commerce  are 

unjustly  discriminatory — 

Leaving  out  "  unreasonably  high  *' — 

a.  *  *  .^i-e  unjustly  discriminatory  between  shippers  or  ports,  or  unjustly 
prejudicial  to  exporters  of  the  United  States  as  compared  with  their  foreign  com- 
petitors, the  board  is  hereby  empowered  to  alter  the  rates  or  charges  demanded 
to  llie  extent  necessary  to  correct  such  unjust  discrminati(»n  or  prejudice  and  to 
make  an  order  that  such  carrier  shall  cease  and  desist  from  such  unjust  dis- 
crimination or  prejudice.  The  board  is  hereby  also  empowen>d  upon  sworn 
comiilaint.  after  full  hearing,  to  determine,  prescribe,  and  order  enforced  just  and 
i-easonable  regulations  and  practices  i-elating  to  or  connected  with  the  receiving, 
handling,  storing,  and  delivering  of  property  by  any  such  carrier. 

Our  point  being  that  we  have  no  objection  to  the  board  having  the 
power  to  prohibit  unjust  and  discriminatory  rates  or  practices  be- 
tween shippers  or  anything  which  will  be  discriminatory  or  unjust 
as  between  the  connnerce  of  this  country  and  the  connnerce  of  other 
counti-ies.  AVe  do  object  to  the  power  being  given  to  the  boai'd  to 
determine  what  shall  be  a  fair  rate  or  whether  a  rate  is  unreasonably 
high  or  not.  AVe  believe  that  so  long  as  the  rate  is  fair  as  between 
all  the  shippers  and  no  prejudice  is  done  to  the  commerce  of  this 
country  as  against  the  connnerce  of  other  countries,  that  the  interest 
of  the  public  welfare  is  entirely  safeguarded;  that  there  is  no  way  in 
Mhich  this  board  or  any  other  board  can  determine  wliat  shall  be  a 
fair  rate  when  it  covers  vessels  of  iierh-iips  a  hundred  different  types, 
carrvinjr  different  cargoes,  and  of  vessels  of  different  costs. 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  67 

Mr.  Saunders.  Just  a  word  in  that  connection,  ^'oii  think,  as  a 
matter  of  sound  public  policy  in  the  United  States,  for  instance,  the 
railroads  ought  to  be  allowed  to  charge  unreasonably  high  rates ^ 
Leaving  out  for  the  present  the  difference  between  inter.state  railroad 
transportation  and  commerce  on  the  high  .seas,  do  you  think  the  rail- 
roads ought  to  be  allowed,  in  the  interests  of  public  policy,  to  charge, 
unreasonably  high  rates? 

Mr.  Bush.  I  think  it  is  the  established  policy  of  the  country  that 
the  railroads  shall  not  be  so  allowed. 

Mr.  Saunders.  That  is  controlled  by  a  commission  ? 

Mr.  Bush.  That  is  controlled  by  a  commission. 

Mr.  Saunders.  In  other  words,  that  the  Government  is  allowed  to 
apply  the  law-  of  reasonableness  to  railroad  transjiortation,  forbid- 
ding the  railroads,  if  they  had  the  opportunity  to  do  it,  from  charg- 
ing unreasonably  high  rates'!' 

Mr.  Bush.  Yes. 

Mr.  Saunders.  That  is  a  matter  of  administration  in  the  hands  of 
the  Interstate  Commerce  Commission  ? 

Mr.  Bush.  Yes. 

Mr.  Saunders.  Xow.  having  in  mind  the  traffic  on  the  high  seas, 
which  it  is  proposed  to  have  controlled  by  a  board,  why  should  a 
man  engaged  in  traffic  of  that  sort  be  allowed  to  charge  unreasonably 
high  rates,  and  why  would  not  a  board,  composed  of  the  same  type  of 
men  that  compose  the  Interstate  Commerce  Commission,  be  as  well 
able  to  apply  the  law  of  reasonableness  to  the  traffic  on  the  high  seas 
as  to  traffic  on  the  i-ailroads?  What  is  there  to  hinder  them  from 
doing  it? 

Mr.  Bush.  I  think  the  difference  is  that  on  the  railroads  you  are 
haulinga  train  of  cars  made  upof  small  units,  where  the  fixed  operating 
cost  is  more  or  less  permanent  and  more  or  less  easily  determined. 
It  is  a  very  difficult  thing  to  determine  even  in  the  case  of  the  rail- 
roads. But  Avhere  you  are  operating  vessel  property,  wdiere,  perhaps, 
one  man  may  own  one  ship — that  may  be  the  extent  of  his  invest- 
ment— unlike  the  New  York  Central  or  the  Pennsylvania  Railroad, 
where  the  law  of  averages  is  spread  over  thousands  and  thousands  of 
cars,  he  has  one  property.  I  do  not  like  to  answer  questions  in  the 
Irish  fashion,  but  I  would  like  to  know^  first  how  are  you  going  to 
determine  the  reasonableness  of  the  charge— are  you  going  to  base  it 
on  the  return  on  the  investment?  If  you  base  it  on  the  return  on  the 
investment,  how  are  you  going  to  protect  the  man  Avho  has  a  boat 
for  which  he  has  paid  $140  a  ton  as  against  a  man  who  has  paid  $iO 
a  ton? 

Mr.  Saunders.  Taking  up  the  suggestion  that  you  make,  which  \f. 
a  perfectly  fair  and  legitimate  one,  you  suggest  difficulties  rather 
than  a  possibility.  It  may  be  that  all  of  those  elements  and  those 
factors  you  speak  of  ought  to  enter  into  the  determination  by  the 
board,  but  that  does  not  make  it  impossible  for  them  to  ari-iAC  at  a 
determination.  For  instance,  it  is  a  perfectly  plain  proposition, 
after  you  have  all  the  factors  before  you,  it  seems  to  me,  to  ascertain 
whether  a  man  in  this  business  is  making  more  profit  than  :ie  reason- 
ably ought  to  be  allowed  to  make  at  the  expense  of  the  public. 

Mr.  Bush.  I  think  I  should  rest  our  objection  to  thsit  upon  two 
points 


68  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Saunders.  Just  let  me  finish  that  in  connection  with  the  dif- 
ferent costs  of  the  vessels  you  speak  of.  That  would  he  fairly  con- 
sidered, of  course,  by  the  commission.  But  when  that  is  fairly  con- 
sidered why  would  not  a  mind  that  is  capable  of  suijijovsting  tlie  dif- 
ficulties and  appreciating  them  be  able  to  arrive  at  a  just  conclusion? 
It  is  merely  u]'ou  a  new  state  of  facts  or  a  new  equatu)n  that  the  ap- 
plication of  the  law^  as  to  reasonableness  is  made  and  why  can  not 
that  bo  done? 

Mr.  Bush.  I  can  only  answer  that  by  saying  we  searched  the  minds 
of  the  steamship  operators  in  New  York  and  have  not  been  able  to 
find  thiit  mind,  although  it  may  exist;  but  Ave  have  not  been  able  to 
find  a  mind  which  can  suggest  a  way  by  wdiich  all  those  different 
difficulties  can  be  overcome.  It  is  no  secret  I  am  personally  not  an 
experienced  steamship  man,  but  we  have  men  here  who  are  per- 
fectly capable  of  giving  direct  answers  to  (juestions  of  that  char- 
acter. I  should  rest  my  own  answer  upon  two  or  three  points.  In 
the  first  i)lace,  I  would  again  like  to  make  the  point  that  we  have 
not  a  merchant  marine  as  we  had  a  railroad  system  when  we  began 
to  regulate  the  railroads.  One  of  the  most  important  things  is  that 
in  enacting  restrictive  legislation  it  is  going  to  discourage  American 
investors  from  going  into  the  steamship  business.  I  think  that  the 
thought  in  his  mind  that  if  he  invests  half  a  million  or  a  million 
dollars  in  one  steamer,  that  the  entire  earning  power  of  that  steamer 
is  going  to  be  in  the  hands  of  a  board  of  eminently  just  and  fair- 
minded  men,  but  not  men  experienced  in  the  steamship  business;  I 
think  that  fact  itself  is  enough  to  prevent  me,  at  least,  from  going 
into  the  steamship  business,  and  if  it  prevents  me,  I  think  it  will  pre- 
vent a  great  many  others  from  doing  the  same  thing. 

Mr.  Saunders.  You  are  afraid  that  some  board  might  exercise 
these  powers  to  discourage  American  commei'ce — which,  it  seems  to 
me,  Avould  hardly  be  a  reasonable  or  a  likely  thing  for  it  to  do — if 
vested  with  powers  which  will  enable  them  to  control  foreign  com- 
]ietitors  in  the  interest  of  American  shippers  and  the  capitalist  who 
is  disposed  to  invest  his  means  in  American  ships.  You  suggest, 
which  is  true,  that  we  are  building  up  an  American  merchant  marine. 
Is  it  not  fundamental  to  that  process  of  building  it  up  that  you 
hhould  have  some  way  of  holding  a  restraint  OAer  this  foreign  com- 
petition? That  is  an  essential  factor  in  the  upbuilding  of  this 
budding  merchant  marine  of  America  on  the  high  seas,  it  seems  to  me. 

Mr.  BusiT.  We  have  no  confidence  that  this  country  can  legislate 
our  foreign  competitors  out  of  business. 

Mr.  Saunders.  We  do  not  propose  to  do  that. 

Mr.  BusiT.  We  believe  that  all  business  must  ultinuitely  rest  upon 
equal  conditions,  and  when  equal  conditions  have  been  established 
it  depends  then  upon  the  energy  and  enterprise  of  the  men  con- 
ducting the  business. 

Mr.  Saunders.  I  believe  that  is  fundamentally  true. 

Mr.  Bush.  We  believe  that  fundamental  theory  which  has  to  un- 
derlie the  establishing  of  an  American  merchant  marine  is  the  equal- 
ization of  conditions,  and  we  do  not  believe  you  can  create  that  by 
legislatiA'e  means. 

Mr,  Saunders.  Let  us  see  about  that.  Is  not  one  of  the  difficul- 
ties— certainly  developed,  we  thought,  in  the  investigation  made 
some  years  ago  by  this  committee — the  fact  that  there  are  practices 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  69 

among  the  foreign  trades,  among  the  merchant  marine  and  the  capi- 
tal of  foreign  countries  invested  in  the  merchant  marine,  that  are  to 
the  distinct  prejudice  and  disadvantage  of  the  capitalists  of  this 
country  seeking  to  go  into  that  business  ^vith  American  ships? 

Mr.  Bush.  If  you  refer  to  rebates  and  fighting  ships,  and  prac- 
tices of  that  kind,  Ave  believe  those  practices  have  existed. 

Mr.  Saunders.  Have  existed? 

Mr.  Bush.  That  at  the  present  time,  very  largely,  they  do  not 
exist,  but  they  may  come  back. 

Mr.  Saunders.  If  we  can  curb  them,  is  nut  that  an  advantage  to 
the  American  capitalist? 

Mr.  Bush.  We  believe  the  power  should  be  given  to  this  board  to 
regulate  to  the  fullest  possible  extent  in  the  interest  of  fair  play 
and  in  the  preventing  of  any  discriminatory  practices  or  any  unfair 
practices;  but  we  have  not  been  able  yet  to  see  a  way  in  which  can 
be  determined  what  is  an  unjustly  and  unreasonably  high  rate,  and 
we  came  down  here  with  a  full  desire  to  learn  of  such  a  way  if  it 
does  exist. 

Mr.  Saunders.  I  perfectly  understand  that,  and  that  is  the  reason 
we  are  talking  over  these  problems  with  you  now.  But  you  know 
it  is  only  the  maximum  rates  our  bill  refers  to.  while  in  the  regula- 
tion of  railroad  rates,  in  the  interstate-commerce  law,  it  is  both  maxi- 
mum and  minimum  rates.    I  refer  to  line  21,  page  9- 

The  Chair^vian.  You  speak  about  the  difficulty  of  determining 
what  will  be  a  reasonable  rate.  Does  not  the  Interstate  Commerce 
Commission  have  that  same  problem  to  solve  ?  It  costs  twice  as  much 
per  mile  to  build  some  railroads,  or  many  times  more  to  build  some 
railroads,  than  it  does  to  build  others;  yet  they  do  not  allow  one 
rate  on  a  railroad  which  costs  so  much  more  to  build  and  maintain 
than  they  do  on  the  other.  Don't  they  take  all  those  factors  into 
consideration  in  determining  what  is  a  reasonable  rate  on  the  several 
lines? 

Mr.  Bush.  I  think  all  those  things  are  spread  out  on  the  railroads 
by  the  law  of  averages. 

The  Chairman.  I  suppose  that  would  be  true  in  the  merchant 
marine,  too,  would  it  not?  You  would  not  expect  because  a  man 
paid  $150,000  a  ton  for  his  ship  and  the  other  paid  $50  a  ton,  that 
the  first  man  should  charge  three  times  as  much?  There  Avould  have 
to  be  an  average,  otherwise  the  man  who  paid  the  higher  price  in 
the  business  could  not  compete  with  the  man  who  had  the  cheaper 
ship. 

Mr.  Bush.  I  was  speaking  not  so  much  of  the  average  in  the 
cost  of  construction  as  I  was  of  the  average  of  operating  conditions 
on  the  railroad,  that  is  spread  over  the  handling  literally  of  hundreds 
of  thousands  of  cars.  But  here,  you  have  running  between  this  and 
any  given  European  port  such  a  steamer  as  Mr.  Franklin  operates, 
perhaps,  capable  of  carrying  20,000  or  25,000  tons  of  freight,  and  also 
the  small  steamer  capable  of  carrying  3,000  tons.  They  are  running 
in  exactly  the  same  service.  We  are  not  willing  to  admit  the  theory, 
although  we  admit  the  intent  is  there  to  do  justice,  that  it  can  be 
done  fairly ;  we  are  not  willing  to  accept  the  statement  that  it  can  be 
done  simply  on  faith  in  encouraging  the  upbuilding  of  a  merchant 
marine,  until  it  can  be  shown  how  it  can  be  done.  Our  theory  that 
this  thing  would  be  done  or  that  thing  can  be  done  is  a  matter  of 


70  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

speculating  on  business  conditions,  and  very  often  when  you  are 
confronted  Avith  the  actual  necessity  of  shoAving  how  to  do  it  it  is 
quite  a  different  matter.  Before  you  gentlemen  prescribe  laws  wliicli 
will  give  anyone  the  power  to  make  such  drastic  regulations  of  the 
earning  power  of  vessel  property,  we  think  it  is  up  to  you,  before 
you  pass  such  a  law,  to  show  us  a  reasonable  way  in  which  it  can 
be  carried  out.    And  so  far  that  has  not  been  done. 

Mr.  Hakdy.  Do  you  think  in  the  interests  of  the  welfare  of  the 
whole  people  that  an  established  line,  for  instance,  like  the  Pacific 
Mail,  running  to  the  Orient  from  our  western  coast,  having  a  patron- 
age which  makes  it  splendidly  prosperous,  should  be  allowed  to 
double  the  rates  on  their  freight  without  any  power  in  existence 
to  say.  "■  You  shall  be  somewhat  reasonable  to  the  public,'"  and  to 
prescribe  a  maximum?  That  is  all  this  bill  does.  Here  is  a  rate  on 
this  line  that  has  been  perhaps  increased  1,000  pev  cent  because  busi- 
ness conditions  permit  them  to  do  it  and  the  trade  is  bound  to  submit. 
Ought  there  to  be  nowhere  under  the  sun  a  power  to  restrain  the  fear- 
ful grasp  that  uses  such  conditions  to  oppress  the  people? 

Mr.  Bush.  Those  conditions  are  conditions  which  are  the  result 
of  an  emergency. 

Mr.  Hardy.  Granted. 

Mr.  Bush.  And  if  you  attempt  to  legislate  for  emergency  condi- 
tions for  established  lines  and  which  are  going  to  be  in  force  for 
all  time,  I  think  the  chances  are  you  Avill  do  a  greater  injustice 

Mr.  Hardy.  You  do  not  establish  rules  to  be  enforced  for  all 
time  further  than  you  establish  a  power  Avhich  shall  be  in  force 
for  all  time  Avhich  Avill  prevent  this  robbery  for  all  time.  Is  your 
ansAver  that  there  should  be  nothing?  Is  your  position  that  there 
should  be  nothing  to  prevent  that  ? 

Mr.  Bush.  Our  ansAver  and  our  position  is  that  the  power  should 
not  be  granted,  that  there  should  be  no  poAver  of  that  kind  granted 
until  you  can  shoAv  the  business  public  how  you  can  fairly  apply  it. 

Mr.  Hardy.  Does  not  the  ])resent  condition  and  the  condition 
AA'hich  has  existed  for  nearly  a  year  and  a  half,  shoAv  that  there  comes 
a  time  Avhen  the  helpless  public  needs  a  power  in  the  hands  of  a 
restraining  board  Avhich  prevents  oppression? 

Mr.  Bush.  It  Avould  be  my  ansAver  to  that,  ffudge  Hardy,  if  that 
poAver  had  been  vested  in  the  Government  to-day,  that  the  American 
shipper  Avould  liaA^e  to  stand  on  the  seaboard  Avith  his  A\'ares  and  the 
ships  Avould  be  employed  in  other  trades:  that  the  oAvner  of  the 
steamship,  Avhich  is  not  like  a  i-ailroad  that  has  to  run  betAveen  tAVO 
fixed  points,  is  free  to  move  upon  its  own  bottom  anywhere  in  the 
Avorld.  In  the  present  condition,  unless  i)eople  Avho  ship  goods  from 
America  are  Avilling  to  pay  the  rates  of  the  Avorlcl.  the  American 
shipper  Avill  be  Avithout  ships,  and  no  greater  injustice  could  be  done 
the  American  producer  than  just  such  legislation  as  you  are  suggest- 
ing noAv. 

Mr.  Hardy.  On  the  other  hand,  you  thing  on  those  goods  from 
here  that  have  to  be  transpoi-tod.  that  the  ship  carrier,  knoAving  they 
have  to  be  transported,  should  be  i:)ermitted  simply  to  charge  any- 
thing he  pleases?     It  is  taking  advantage  of  necessit,y. 

Mr.  Bush.  I  do  not  think  I  agree  Avith  you  on  that,  Mr.  Hardy. 
I  thinlc  the  American  people  must  pay  the  competitive  rate  for  ocean 
tonnage. 


REGULATOKV    FEATUUKS    Oh'    SllirriNG    Ull.L.  71 

Mr.  IIahdy.  Is  not  tlie  Europoaii  countrv  bound  to  have  her  food 
supplies  ? 

Mr.  Bush.  What  is  that^ 

Mr.  PIakdt.  Is  not  the  Kuropean  coiiiitry  bound  to  have  her  food 
supplies? 

Mr.  Bush.  It  is  bound  to  have  its  food  supplies;  but  we  are  ncjt 
the  only  producer  of  food  supplies. 

Mr.  Hardy.  But  we  are  the  only  ade(|uate  supplier  now  (possibly 
we  are  not  the  only  supplier)  not  only  of  food  supplies  but  of  other 
supplies.  It  simply  seems  to  me  that  it  gets  down  to  the  question 
of  Avhether  there  ought  to  be  any  i)ower  anywhere  to  prevent  mo- 
nopoly, because  it  is  a  question  of  ])reventing  monopoly.  If  com- 
petition was  free.  I  do  not  think  there  would  be  any  need  of  it;  but 
you  are  aware  that  our  investigation  demonstrated  the  great  shi]) 
lines  were  all  in  combinations  and  up  to  the  present  time  they  have 
had  the  power,  whenever  conditions  arose,  to  fix  arbitrarily  just 
such  rates  as  they  thought  proper. 

Mr.  Bush.  M}^  oavu  view.  Judge  Hardy,  is  that,  broadly  speaking, 
spread  over  a  long  ])eriod  of  years,  there  is  no  industry  in  the  woi'ld 
which  is  so  regulated  by  the  law  of  supply  and  demand  and  com- 
petition as  the  steamship  industry.  There  have  been  special  cases 
where  there  have  been  combinations  in  that  trade,  as  there  have 
been  in  all  other  trades,  but  just  as  soon  as  a  combination  is  estab- 
lished in  the  ocean-carrying  trade,  which  produces  an  unduly  higli 
rate,  there  are  other  vessels,  as  there  are  always  in  normal  times, 
that  are  capable  of  carrying  the  cargo,  those  vessels  would  be  di- 
verted into  that  trade  in  a  clay's  time.  You  do  not  have  to  build  a 
road  or  a  concrete  factory,  but  merely  to  transfer  it.  and  instead  of 
sending  the  ship  from  Boston  to  South  America,  say.  to  send  it  fi-om 
Boston  to  London. 

Mr.  Hardy.  To  give  you  an  illustration  of  that  kind.  I  will  apj)ly 
it  to  a  little  town  in  my  own  State,  w^hicli  undertook  to  charter  such 
a  vessel  because  they  were  charged  just  such  rates.  Thev  sent  that 
vessel  to  Baltimore  to  secure  a  cargo.  Thev  kneAv  that  if  the  rates 
charged  bv  the  combination  were  lived  up  to.  that  vessel  would  pay 
and  Avould  make  an  ample  and  magnificient  return  on  the  investment; 
but  before  the  vessel  got  started  here  was  a  fighting  ship  that  the 
combination  sent  along. 

Mr.  Bush.  That,  understand,  w^e  ai)prove  of — eliminating  fight- 
ing ships. 

Mr.  Hardy.  I  understand  vou  approve  of  eliminating  fighting 
ships:  but  if  we  go  down  to  South  America  that  fighting  ship  will 
drive  them  out  of  business.  And  it  is  apparent  that,  without  any 
restraint  at  all,  the  big  combination  will  drive  all  competition  out 
of  existence.  And  in  that  connection  South  America  and  other  con- 
ditions might  be  gone  into.  So  that  to-day  the  combination  is  left 
to  fix  just  such  rates  as  they  see  proper,  and  you  have  not  the  com- 
petition of  the  laAV  of  supply  and  demand  of  which  vou  speak. 

]\rr.  Bush.  I  think  that  at  heart  we  have  absolutely  the  same  thing, 
and  the  only  difference  in  our  conclusion  is  we  conclude  we  should 
eliminate  all  unfair  practices,  including  fighting  ships,  rebates,  or 
any  discriminatory  practices;  but  we  do  not  believe  that  the  power 
to  regulate  as  to  what  is  a  reasonable  rate  should  be  given  to  this 
board  until  the  gentlemen  who  frame  that  legislation  can  say  to  us 


72  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

definitely  and  clearly  just  how  you  can  determine  what  is  a  reason- 
able rate  and  upon  what  basis. 

Mr.  Saunders.  Just  in  that  connection,  let  me  ask  you  a  question 
suggested  by  some  of  the  facts  that  Judge  Hardy  brought  out,  be- 
cause we  want  to  get  at  our  respective  points  of  view  in  this  mat- 
ter. Supjjose  you  were  on  this  board  that  it  is  contemplated  be 
created,  and  we  are  dealing  with  present  conditions:  Is  it  your  judg- 
ment that  the  American  producer  is  not  to-day  oi*  within  the  past 
12  months  has  not  been   paying  unreasonably  high   rates? 

Mr.  Bush.  I  do  not  believe  the  American  producer  has  had  to 
pa}^  the  rates;  I  think  it  has  been  the  foreign  buyer  who  has  had  to 
pay  the  rates. 

Mr.  Saunders.  Of  course  that  gives  rise  to  the  old  argument  as  to 
which  end  of  it  pays  the  freight.  Then  we  will  say  somebody  in 
the  business.  Is  it  your  idea  no  unreasonable  rates  have  been  paid 
on  shipments  from  the  United  States?  That  will  eliminate  the  ques- 
tion of  who  pays  it. 

jNIr.  Buspr.  It  Avould  be  my  i)ersonal  opinion,  speaking  as  an  indi- 
vidual alone,  that  some  of  the  rates  which  have  been  charged  have 
given  a  very  large  profit  to  the  steamship  owner.  But  I  think  that 
has  been  due  to  the  fact  that  the  vessels  could  only  be  persuaded  to 
go  into  this  trade  if  they  were  permitted  to  charge  the  rates  which 
gave  them  such  earnings,  because  if  they  had  not  been  able  to  charge 
such  rates  they  would  have  gone  into  other  trades.  And  I  further 
believe  the  burden,  if  it  has  been  a  burden,  has  not  rested  upon  this 
country  but  has  rested  upon  the  foreign  countries. 

Mr.  Saunders.  I  eliminated  that  feature. 

Mr.  Bush.  Mr.  Chairman,  I  do  not  wish  to  decline  to  answer  all 
these  questions;  I  want  to  give  all  the  information  I  can;  but  as  I 
have  frequently  stated,  I  am  not  a  steamship  man.  I  am  here, 
primarily,  because  I  am  not:  I  am  merely  neutral  in  these  matters 
iind  as  a  neutral  was  api)ointed  chairman  of  this  committee.  We 
iiave  with  us  gentlemen  who  are  very  much  more  able  to  answer 
these  questions  and  give  more  enlightenment  than  I  can. 

Mr.  Saunders.  I  understand,  but  I  want  to  follow  that  up  a  little. 
1  asked  you,  as  a  matter  of  fact,  in  your  judgment,  if  shippers  from 
this  country  had  not  paid  unreasonable  rates  and  your  answer  to  that 
was  there  had  been  some  of  those  ships  that  had  returned  a  very 
great  profit  to  the  people  who  received  those  rates.  Now,  I  think 
Avi>  all  agi'ee  that  there  was  a  certain  volume  of  commerce  that  con- 
diti(ms  of  trade  made  it  absolutely  necessary  to  move  from  this 
country.  It  is  true,  evidently,  that  there  is  a  great  volume  of  stuff 
in  this  coimtry  and  tliat  conditions  were  such  that  it  had  to  go  to 
those  countries. 

Mr.  Bush.  If  that  is  so. 

Mr.  Saunders.  Is  not  that  so? 

Mr.  BusTi.  I  think  that  is  so;  if  it  is  so,  what  injustice  is  done  to 
tliis  coimtry  if  it  is  moved  and  they  pay  the  expense  of  moving  it? 

Mr.  Saunders.  Then  you  come  back  to  this  proposition,  that  all 
tliose  gigantic  rates,  of  which  these  people  are  complaining,  have  not 
been  really  an  injustice  to  this  country? 

Mr.  Busii.  I  think  in  many  cases  they  have  not  been  an  injustice 
to  this  country.     I  have  not  had  the  privilege  of  hearing  all  the  com- 


REGULATORY    Fh:ATURES    OF    SHIPPING    BILL.  73 

plaints  you  have  heard;  but  I  think  in  many  cases  I  have  heard  of 
the  entire  burden  has  been  borne  abroad  and  in  many  cases  the  Ameri- 
can steamship  owner  has  reaped  a  very  hirge  profit  which  has  come 
into  this  country  and  stimuLated  industry  in  this  country. 

Mr.  Saunders.  You  say  in  the  main  these  very  high  rates  have  not 
been  a  disadvantage  to  the  people  of  this  country,  but  a  distinct 
advantage  ? 

Mr.  Busii.  I  think  in  the  main  they  have  stimulated  the  upbuild- 
ing of  the  merchant  marine;  that  they  have  been  a  stimulus  to  the 
upbuilding  of  our  merchant  marine  and  have  done  a  great  deal  more 
than  (jur  bill  or  your  l)ill  could  possibly  do. 

Mr.  Greene.  Are  not  the  prices  on  merchandise  shipped  from  this 
country  made  in  this  country  before  the  shipment  goes  to  the  other 
side  and  paid  for  before  it  is  delivered  on  the  other  side,  or  payment 
arranged  for? 

Mr.  Busii.  I  think  that  is  a  correct  statement. 

Mr.  Greene.  That  is  the  party  who  has  grain  to  sell,  or  any  kind 
of  merchandise  that  goes  abroad,  names  the  price  that  he  will  sell 
for  and  then  the  man  who  buys  the  material,  or  his  agent  here,  pro- 
vides for  the  means  of  shipment? 

Mv.  Bush.  I  think,  broadly  speaking,  if  you  can  make  any  gen- 
eralization, that  is  true.  I  would  except,  perhaps,  the  price  of  grain 
where  it  is  perhaps  regulated  by  the  grain  producing  countries  of 
the  world,  and  certain  other  great  commodities  of  that  kind,  where 
the  price  of  grain  here  must  be  determined  by  the  amount  of  export 
grain  from  Argentina,  Russia,  and  Austria.  But,  broadly  speaking, 
taking  manufactured  articles,  I  think  your  statement  is  correct. 

Mr.  (treene.  The  price  of  grain  is  fixed  before  the  grain  leaves 
here  and  determined? 

Mr.  Bush,  Yes;  it  is. 

Mr.  Greene.  And  is  paid  for  regardless  of  what  the  freight  rate  is? 

Mr.  Bush.  The  price  is  agreed  to  before  it  leaves  here. 

Mr.  Greene,  That  is  it,  exacth\  Then  I  do  not  see  why  these 
other  questions  that  have  been  argued  enter  the  case  at  all. 

Mr.  Edmonds.  If  this  bill  were  in  existence  to-day  and  the  board 
were  to  set  a  maximum  rate  on  freight  from  this  country  to  Euro- 
pean ports,  what  would  be  the  effect  on  the  shipments  from  here 
compared  to  the  shipments,  say,  from  Canada?  Would  not  the 
majority  of  shipments  go  to  Canada,  and  would  not  the  goods  be 
shipped  from  Canada  where  the  ships  could  get  high  freights? 

Mr.  Bush.  I  have  no  doubt  a  great  many  of  the  products  would 
go  to  Canada  and  be  shipped  from  there,  and  the  ships  would  refuse 
to  come  here  unless  they  could  get  the  rates. 

INIr.  Edmonds.  In  other  words,  the  shipment  of  grain  and  other 
products  would  be  transferred  to  Canadian  ports  and  our  ports 
would  suffer? 

Mr.  Bush.  I  have  stated  I  think  it  would  be  the  most  disastrous 
thing  under  the  present  emergencies,  with  all  the  surrounding  cir- 
cumstances, that  could  possibl)^  happen  to  the  American  shipper. 
AVhile  theoretically  it  seems  to  be  a  perfectly  simple  practice,  in 
the  end  it  would  deprive  the  American  shipper  of  the  ships  wdiich 
are  available  to  get  his  commodities  abroad,  and  if  his  commodities 
went  abroad  many  Avould  possibly  pass  through  Canadian  ports, 
which  would  not  be  regulated  in  that  wav.     I  am  verv  much  em- 


74  KEGULATORY    FEATURES    OE    SHIPPING    BILL. 

barrassed.  gentlemen,  because  I  think  I  am  takino;  a  great  deal  more 
time  than  I  have  a  right  to,  and  I  would  like  the  following  speakers 
to  get  a  full  opportunity. 

The  Chairman.  You  are  here  and,  so  far  as  I  am  concerned,  I 
am  very  interested  in  wliat  you  have  to  say  and  I  do  not  want  to 
limit  you  imduly. 

Mr.  Bush.  I  am  trying  to  limit  myself;  but  I  have  been  asked 
questions  and  have  to  answer  them. 

The  Chairman.  We  would  prefer  to  have  you  conchule  your  state- 
ment. 

Mr.  Bush.  I  may  simply  conclude  my  statement  by  pointing  out 
that  the  third  fundamental  Avhich  I  will  cover  in  my  statement  is, 
we  believe,  that  any  of  the  rulings  of  this  commission  should  be 
subject  to  review  by  the  courts  of  the  country.  That  is  the  protec- 
tion which  is  accorded  every  other  kind  of  industry.  This  board  will 
undoubtedly  be  a  very  eminent  board  and  composed  of  just  and 
wise  men,  but  we  believe  no  one  is  infallible  unless  it  is  the  Supreme 
Court  of  the  United  States;  and  that  court  of  last  review  is  open 
to  every  other  class  of  business,  and  we  believe  the  privilege  of 
revieAv  by  the  courts  of  the  United  States  should  be  accorded  the 
vessel  owner. 

Mr.  Saunders.  Have  you  looked  at  section  14  of  the  bill,  where  we 
utilize  for  the  purposes  of  this  new  board  all  the  procedure  and 
rights  provided  for  the  Interstate  Commerce  Commission? 

Mr.  Bush.  We  suggest  that  those  general  clauses  be  eliminated, 
and  I  will  leave  Mr.  Kirlin  to  explain  more  in  detail;  and  we  have 
suggested  the  substitution  of  the  specific  procedure  established  in 
the  Interstate  Commerce  act. 

Mr.  Byrnes.  You  say  Mr.  Kirlin  will  present  that? 

Mr.  Bush.  Mr,  Kirlin  will  present  all  of  those  details. 

N(jw  I  should  like  to  file,  for  the  purposes  of  the  record,  a  state- 
ment of  the  changes  which  we  suggest,  which,  I  think,  cover  20  or  21 
<  hanges.    Many  of  them  are  of  very  minor  importance. 

Then  I  should  like  to  have  the  privilege  of*  introducing  Mr. 
Franklin  as  the  first  speaker. 

The  Chairman.  We  just  do  not  want  any  procedure  adopted  that 
would  prevent  a  wind-up  at  some  time;  we  would  like  to  see  the  end 
of  the  controversy  in  our  lifetime. 

Mr.  Bush.  We  always  have  an  end  in  the  Supreme  Court. 

(The  changes  in  the  bill  referred  to  by  Mr.  Bush  are  as  folloAvs:) 

AMEXDMEXTS    TO    If.    K.    14337.    SCOOESTED    HY    THE   COMMITTEE   OF   THE    CHA.ALnEK    OK 

<0.\rMEHrE    OF    NEW    YOUK. 

Note. — Instructions  of  our  committee  from  the  cliiunher  rehite  only  to  tlie 
foreign  trade.  As  a  committee  we  make  no  sufisestions  except  with  reiiard  to 
the  provisions  of  the  bill  dealinj,'  with  such  trade.  Individual  meinl)ers  of  the 
committee  interested  in  coastwise  trade  will  explain  tluMr  own  views. 

Section  2,  page  4.  line  14,  before  the  figui-es  "  ,$2."'),0(IU,"  insert  the  words  "  not 
more  than." 

Section  3.  page  G,  line  17,  after  the  word  "who,"  ins(>rt  the  woi-d  "willfully." 

Section  .3,  page  6,  line  21,  before  the  ftgures  "  $1,000,"  insert  the  words  "  not 
more  than." 

Section  3,  page  6,  line  4,  strike  out  the  words  "  shall  be  approved  or  "  and 
insert  in  lieu  thereof  "  if  not." 

Section  3,  page  6,  line  5,  strike  out  the  words  "  and  when  approved." 

Section  4,  pages  7  and  8  and  first  nine  lines  of  page  9,  delete  the  entire  sec- 
tion. 


KEGULATOliV    FKATUKKS    OF    SH[PP1X(;    lUI.L.  75 

Section  5,  strike  out  tiie  sei-tion  as  i)riii(('(l  and  suhsfidilc  the  followiii.i:- : 
"Sec.  5.  Tliat  wlieiiever,  after  full  hearin.;,'  upon  a  sworn  fonijtiaint,  tlie 
board  sliall  he  of  ojiinion  tliat  any  rates  or  cliarj^es  deniand(>(l,  eiiarjied,  or  col- 
lected by  any  common  carrit'r  by  water  in  foreii^n  co'umr'rcc  are  unjustly  dis- 
criminatory i)etween  shippers  or  ports,  or  unjustly  prejudicial  to  exporters  of 
the  United  States  as  compared  with  their  foreij,'n  com])etitors,  the  board  is 
hereby  empowered  to  alter  the  rates  or  char.ues  demanded  to  the  extent  neces- 
sary to  correct  such  unjust  discrimination  or  prejudice,  and  to  make  an  order 
that  such  carrier  shall  cease  and  desist  from  such  unjust  discrimination  or 
I)rejudice.  The  board  is  hereby  also  empowered  upon  sworn  complaint,  after 
full  hearing,  to  determine,  prescribe,  and  order  enforced  just  and  reasona1)le 
regulations  and  practices  relating  to  or  connected  with  the  receiving,  handling, 
storing,  and  delivering  of  property  l)y  any  such  carrier." 

Section  9,  page  18.  line  2.5,  after  th-?  word  "all,"  insei-t  the  word  "sw(»rn." 
Section  9,  page  13,  line  25,  strike  out  at  bottom  of  page  18  and  top  of  page  14 
the  words  "  or  to  undertake  investigations  on  its  own  initiative." 

Section  9,  page  14,  line  9,  after  the  word  "  empower,"  insert  the  words  "  on  a 
hearing  of  such  complaint." 

Section  9,  page  14,  line  11,  strike  out  the  words  "  adopt  all  rules  and  regula- 
tions "  and  insert  in  lieu  thereof  the  words  "  make  such  order  as." 
Section  9,  page  14,  line  12,  strilve  out  the  word  "  whicli." 
Section  9,  page  14,  line  14,  add  at  the  end  of  the  .section  the  following: 
"  AVlienever  the  shipping  board  shall  have  reason  to  believe,  from  any 
sworn  complaint  submitted  to  it.  tliat  any  such  person,  i)artnership,  or  cor- 
poration lias  been  or  is  using  any  unfair  practice,  undue  discrimination,  or 
unfair  method  of  comiietition  in  coastwise  or  foreign  conunerce,  or  has  other- 
wise violated  any  provision  of  this  act,  it  may  cause  to  be  issued  and  served 
upon  the  party  complained  of  a  statement  of  its  cliarge  and  a  notice  requiring 
an  answer  from  the  party  so  charged  witliin  the  period  of  thirty  days  after  the 
service  of  the  statement.  If  the  answer  of  the  party  .so  charged  shall  be  un- 
satisfactory, the  board  may,  at  such  time  and  place  as  it  may  determine, 
require  the  party  comiilained  of  to  attend  with  witnesses  at  a  hearing  of 
which  at  least  thirty  days'  notice  shall  be  given.  The  party  complained  of 
shall  have  the  right  to  appear  at  the  place  and  time  so  fixed,  and  upon  any 
adjourned  days  of  the  hearings,  and  show  cause  why  an  order  should  not  be 
entered  by  the  board  requiring  the  party  complained  of  to  desist  from  the 
violation  of  law  so  charged  in  the  statement.  The  testimony  ou  such  hearing 
shall  be  I'educed  to  writing,  filed  in  the  otlice  of  tlie  board,  and  a  copy  thei-eof 
shall  be  furnished  to  the  party  complained  of.  If,  upon  such  hearing,  tlie 
board  shall  be  of  opinion  that  the  matter  complained  of  is  prohibited  by  this 
act,  it  shall  make  a  report  in  writing  in  which  it  shall  state  its  findings  as  to 
tlie  facts,  and  shall  issue  and  cause  to  be  served  on  such  person,  partnership, 
or  corporation  comphiined  of  an  order  requiring  such  person,  partnership,  or 
corporation  to  cea.se  and  desist  from  using  such  unfair  practice,  undue  dis- 
crimination, or  unfair  method  of  competition  complained  of.  Until  a  tran- 
script of  the  record  in  such  hearing  sliall  have  been  filed  in  tlie  circuit  court 
of  appeals  of  the  Ignited  States  as  liereinafter  provided,  the  board  may  at  any 
time,  on  its  own  motion  or  on  motion  of  the  party  complained  of,  rehear  the 
subject  matter  of  the  complaint,  and  codify  or  set  aside,  in  whole  or  in  part, 
any  report  or  any  order  made  by  it  under  tliis  section. 

"  If  the  party  complained  of  fails  or  neglects  to  obey  such  order  of  the  board 
while  the  same  is  in  eflect,  the  board  may  apply  to  the  United  States  circuit 
c(mrt  of  appeals  within  the  circuit  where  the  unfair  practice,  undue  disc!'imina- 
tion,  or  unfair  method  of  competition  in  question  was  used,  or  where  such  per- 
son, partnershp,  or  corporation  resides  or  has  its  principal  place  of  business  for 
the  enforcement  of  its  order  and  shall  certify  and  file  with  its  application  a 
transcrijit  of  the  entire  record  in  the  proceeding.  On  such  filing  of  the  applica- 
tion and  transcript  of  record  the  court  shall  cause  notice  thereof  to  he  served 
upon  such  person,  partnership,  or  corporation  and  thereupon  shall  have  juris- 
diction of  the  proceeding  and  of  all  questions  involved  therein. 

"It  shall  have  power  to  make  and  enter,  upon  the  pleadings,  testimi>ny,  and 
I)roceedings  .set  forth  in  such  transcript,  and  upon  such  fniMher  ])i-oofs  as  in  its 
discretion,  and  in  the  furtherance  of  justice  it  may  grant  leav(>  to  any  party  in 
interest  to  adduce,  a  decree  aflirming.  iiKxlifying.  or  setting  aside  the  order  of  tlie 
board. 

"  The  judgment  and  decree  of  the  court  shall  be  final,  subject  to  review  of  the 
Supreme  Court  upon  certiorari,  as  provided  in  section  two  hundred  and  forty  of 
the  .Tudicial  Code. 


76  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

"Any  party  required  by  an  order  of  the  hoard  to  cease  and  desist  from  doing 
any  act  comphiined  of  may  ohtain  a  review  of  sucli  order  in  tlie  circuit  court  of 
appeals  by  filing  in  the  court  a  written  petition  praying  that  the  order  of  the 
board  be  set  aside. 

"A  copy  of  such  petition  shall  he  forthwith  served  iipon  the  board  and  there- 
upon the  board  shall  serve  and  tile  in  the  court  a  transcript  of  the  record,  as 
hereinabove  provided. 

"  Upon  the  filing  of  the  transcript  the  court  shall  have  the  same  jurisdiction 
to  affirm,  set  aside,  or  modify  the  order  of  the  board  as  in  the  case  of  the  appli- 
cation of  the  board  for  the  enforcement  of  this  order,  and  shall  have  the  like 
discretion  with  regard  to  granting  leave  to  any  party  to  adduce  further  proofs. 

"  Proceedings  under  this  act  in  the  United  States  circuit  court  of  appeals 
shall,  upon  the  aiiplication  of  any  party,  be  given  precedence  over  other  cases 
pending  therein  and  shall  be  expedited. 

"  Complaints,  orders,  and  other  processes  of  the  board  may  be  served  by  any 
person  duly  authorized  by  the  board  either  (a)  by  delivering  a  capy  thereof 
to  the  party  served,  or  to  a  member  of  the  partnership  to  be  served,  or  to  an 
executive  officer  of  a  corporation  to  be  served,  or  (h)  by  leaving  a  copy  thereof 
at  the  pi'incipal  office  or  offices  of  such  person,  iiartnershi]),  or  corporati(ni,  or 
(c)  b,v  registering  and  mailing  a  copy  thereof  addressed  to  such  person,  partner- 
ship, or  corporation  at  his  or  its  principal  othce  or  place  of  business. 

"  The  verified  I'eturn  by  the  person  deputed  to  make  such  service,  setting 
forth  the  manner  in  which  it  has  l)een  made,  shall  be  proof  of  the  same,  and 
the  return  post-office  receipt  shall  be  ]»roof  of  the  service  of  any  process  by 
registered  mail." 

Section  10,  page  14,  line  17  after  the  word  "'  empowered,"  strike  out  the 
words  "  in  its  discretion  "  and  insert  in  lieu  thereof  the  words  "  on  the  hearing 
of  a  sworn  complaint." 

Section  10,  page  14,  line  24,  after  the  words  "to  the,"  insert  the  words  "said 
complaint." 

Beginning  witli  the  word  "  carrier,"  in  said  line  24,  strike  out  the  remainder 
of  that  line,  all  of  line  2.5,  and  on  page  15,  lines  1,  2,  3,  4,  to  and  including  the 
words  "  out  of  this  act." 

Section  10,  page  15,  strike  out  lines  9  to  17,  inclusive,  and  the  first  half  of 
line  18,  to  and  including  the  word  "  thereto." 

Section  11,  page  16,  delete  the  entire  section. 

Section  12,  page  17,  delete  the  entire  section. 

Section  13,  page  18,  delete  the  entire  section. 

Section  14,  page  LS,  delete  the  entire  .section. 

The  committee  wishes  to  make  it  clear  that  they  prefer  the  alternative  sec- 
tion with  regard  to  regulations,  which  was  drawn  by  INIr.  Kirlin  and  submitted 
to  the  chairman  to  be  incorporated  in  House  bill  10500  in  place  of  sections  9  and 
10.  but  have  submitted  the  foregoing  suggestions  for  clianges  in  House  bill  14337 
in  a  sincere  desire  to  take  the  form  of  legislation  suggested  by  the  committee 
and  modify  it  so  that  it  would  be  less  objectionable  from  a  practical  operating 
point  of  view. 

Mr.  Bush.  Mr.  Chairman,  I  would  like  to  introduce  next  Mr. 
Lawrence  K.  Sherman,  who  is  vice  president  of  W.  R.  Grace  &  Co. 
I  would  like  to  call  your  particular  attention  to  the  fact  that  W.  R. 
Grace  &  Co.  began  their  business  primarily  as  export  mercliants  to 
foreign  countries,  and  while  they  are  now  interested  both  in  the  mer- 
chandising and  the  steamship  business,  the  steamship  business  is 
secondary  to  the  merchandising  business.  They  began  as  merchants 
and  found  it  necessary,  in  order  to  carry  their  goods  to  foreign 
countries,  to  employ  sailing  vessels  in  the  first  place  (one  of  their 
large  trades  being  to  the  west  coast  of  South  America),  and  the  sail- 
ing vessel  has  gradually  grown  into  a  steamship.  But  their  interests 
in  steamships,  while  large,  is  supplemental  to  their  interests  as  mer- 
chants. 

Mr.  Sherman  can  speak  both  from  the  standjioint  of  a  shipper  and 
as  a  steamship  man.  Also,  if  you  desire  to  ask  him  upon  that  point, 
he  can  give  you  a  very  definite  statement  about  the  difference  in  cost 
of  operating  under  the  English  and  American  flags,  because  he  has  in 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  77 

his  office  records  of  the  exact  operating  cost  under  the  English  flag 
and  the  exact  operating  cost  of  the  same  vessels  after  transferring  to 
the  American  flag.  And  before  making  the  transfer  all  those  figures 
were  considered. 

The  Chairman.  I  suppose  he  is  in  the  same  class  as  the  Standard 
Oil  Co.  and  the  United  States  Steel  Corporation,  who  found  it  neces- 
sary, in  order  to  develop  the  foreign  commerce  in  their  counnodities, 
to  own  ships  themselves  so  as  to  provide  the  necessary  tonnage  and 
also  to  insure  for  themselves  reasonable  rates  in  order  to  com]:)ete 
with  their  foreign  competitor.  I  think  it  very  wise  on  his  part,  and 
1  wish  other  merchants  would  do  the  same  thing. 

STATEMENT  OF  MR.  LAWRENCE  K.  SHERMAN,  VICE  PRESIDENT 
OF  W.  R.  GRACE  &  CO.,  NEW  YORK,  N.  Y. 

Mr.  Sherman.  As  Mr,  Bush  has  stated,  our  commercial  interests 
are  greater  than  our  steamship  interests.  Our  beginning  in  the 
transportation  business  dates  away  back  of  the  question  of  any  dis- 
crimination, or  anything  of  that  sort.  We  ran  sailing  vessels  50 
years  ago  to  South  America,  and,  like  all  merchants  who  have  gone 
into  shipping,  we  did  it  because  we  found  it  necessary  to  carry  on 
our  business.  In  the  course  of  time  we  fomid  it  convenient  to  take 
outside  freight  and  in  general  to  develop  in  a  steamship  way,  which 
latter  business  has  been  gradually  growing.  To-day  our  steamship 
interests  are  considerable,  but  our  commercial  interests  are  consider- 
ably greater. 

Mr.  Franklin  has  covered  this  bill  pretty  fully,  I  think,  from  a 
steamship  point  of  view,  and  I  concur  in  what  he  has  said  along  that 
line.  My  objection  to  the  bill,  generally,  is  rather  from  the  other 
point  of  view.  I  think  it  would  be  detrimental  to  our  commerce;  I 
think  it  would  prevent  the  rapid  development  of  the  opportunity 
we  now  have  of  extending  our  commerce,  and  I  do  not  think  we 
need  it. 

I  do  not  think  there  has  been  any  unjust  discrimination  system- 
matically  practiced  in  favor  of  Europe  as  against  the  commerce  of 
the  United  States.  If  there  has,  I  have  not  seen  it  in  25  or  30  years' 
experience.  I  do  not  doubt  you  can  find  instances  here  and  there, 
but  in  the  main  the  United  States  in  the  trade  with  which  I  am  famil- 
iar— to  South  America — has  had  rates  which  compared  favorably 
with  Europe.  There  are  items,  like  cement,  where  vessels  which 
would  otherwise  have  to  go  back  in  ballast  take  the  cement  at  a  very 
low  rate.  But  that  is  a  condition  we  can  not  compete  with.  If  you 
were  to  regulate  the  rates  you  would  have  to  recognize  that.  ^Miere 
the  vessel  goes  back  loaded  with  freight  to  Europe  and  with  no  re- 
turn cargo  you  can  get  better  rates  from  Europe  than  you  can  get 
from  the  United  States,  because  they  can  afford  to  go  out  for  less. 

On  the  question  of  pipes,  the  freights  from  Argentina  to  Europe 
have  been  higher  than  they  have  from  the  United  States.  We  have 
been  bringing  coffee  and  cocoa  to  New  York  and  transshipping  to 
Europe  because  we  could  do  so  more  economically  than  we  could 
ship  direct.  Those  are  all  instances  which  come  up  from  time  to 
time. 

The  rates  of  the  regular  lines  to  South  America  and  the  classifica- 
tions have  corresponded  pretty  closely  to  the  classifications  and  rates 


78  REGULATOEY    FEATURES    OF    SHIPPING    BILL. 

from  this  side.  On  some  articles  Ave  have  had  to  make  rates  slightly 
lower  to  try  to  divert  the  business.  If  we  did  not  make  such  rates, 
or  if  we  had  no  power  to  make  such  rates,  we  would  not  get  the  busi- 
ness: and  if  we  have  to  consult  and  the  other  fellow  does  not,  we 
shall  lose  the  business.  There  is  a  lot  of  business  that  won't  come  to 
us  exce])t  ui^on  a  t-ompetitive  basis;  and  if  the  European  line  is  free 
to  do  what  it  pleases  upon  a  moment's  notice  and  if  we  have  to  con- 
sult a  commission  here  and  talk  it  over,  the  opportunity  will  be  lost 
before  Ave  can  get  a  decision. 

Rates  in  the  main  are  controlled  by  the  supply  and  demand.  The 
business  is  open  competition  at  any  moment.  It  is  impossible  to 
carry  on  any  unreasonable  rate  in  a  trade  for  any  length  of  time, 
simply  because  the  other  boats  will  flock  in  and  take  the  business. 

That  is  all  I  have  to  say  generally.  I  would  be  glad  to  answer  any 
questions  j^ou  care  to  ask  about  the  business. 

]\Ir.  Hadley,  What  do  you  think  would  be  the  effect  of  the  passage 
of  this  bill.  14337,  upon  the  effort  to  build  up  the  trade  Avith  South 
America  ?    You  have  been  engaged  in  that  trade? 

iNIr.  SiiERMAx.  I  think  the  effect  Avould  be  detrimental  rather  than 
beneficial. 

Mr.  Hadley.  Why  ? 

Mr.  Shermax.  Because  Ave  have  to-day  competitive  business  Avith 
the  Avorld ;  Ave  have  to  compete  Avith  all  the  world,  and,  Avorking  on 
that  basis,  we  are  not  paying  higher  rates  as  a  rule.  If  Ave  are  re- 
stricted by  a  maximum  rate  of  tariff,  at  times  we  will  be  deprived 
of  sufficient  tonnage  to  develop  our  business;  if  Ave  have  to  consult 
a  commission  in  order  to  change  our  rates,  we  would  lose  time,  and 
3^ou  can  not  Avork  it  because  Ave  would  lose  the  business. 

The  CiiAiiiMAx.  If  that  poAver  Avere  eliminated.  Avhat  objection 
Avould  you  luiA-e  to  it  then  ?  In  other  Avords,  let  me  see  hoAv  you  stand. 
You  are  a  steamship  man.  Are  you  in  favor  of  permitting  your  com- 
pany to  charge,  demand,  collect,  or  receive  from  any  person  or  per- 
sons by  any  special  rate,  rebate,  draAvback,  or  other  device  a  greater 
or  less  conii)ensation  for  any  service  rendered  or  to  be  rendered  in 
the  transi)ortation  of  passengers  or  property  subject  to  the  provisions 
of  this  bill  than  it  charges,  demands,  collects,  or  receives  from  any 
othei-  i)erson  or  persons  for  doing  for  him  or  them  a  like  serA^ce  in 
the  trausi)ortation  of  a  like  kind  of  traffic  under  substantially  similar 
circumstances  and  conditions? 

Mr.  Sherman.  You  are  speaking  noAv  from  the  steamship  point 
of  view  ? 

The  Chairman.  Yes. 

Mr.  Sherman.  I  do  not  object  to  that.  I  do  not  Avant  discrimina- 
tion in  any  way.  I  was  speaking  there  of  the  bill  from  the  general 
point  of  A'leAv  of  the  merchant;  but  I  do  not  Avant  as  a  merchant  the 
right  to  discriminate. 

The  Chairman.  This  is  leveled  at  you  and  it  is  from  the  standpoint 
of  the  merchant  who  Avants  fair  treatment;  he  does  not  Avant  you  to 
play  favorites  with  his  competitors. 

Mr.  Sherman.  Quite  so;  I  do  not  want  favorites. 

The  Chairman.  Very  Avell.  Then  you  do  not  object  to  that  pro- 
vision, do  you?  , 

Mr.  Sherman.  No.  I  do  not  object  to  anything  that  aviII  affect 
everybody ;  I  think  everybody  should  be  treated  the  same. 


REGULATORY    FEATURES    OF    SHIPPINO    ]?II.I..  79 

Mr.  RowE.  Which  paragraph  is  that? 

The  Chairman.  Page  7,  the  first  paragrapli.  Again,  do  you 
object  to  this  prohibition  of  you  as  an  operator  of  steamships,  to 
make  or  give  an}^  undue  or  uni-easonable  preference  or  advantage  to 
any  particuhir  person,  locality,  or  description  of  trallic  in  any  re- 
spect Avhatsoever  or  to  subject  any  particular  person,  locality,  or  de- 
scription of  traffic  to  any  undue  or  unreasonable  i)rejudice  or  disad- 
\antage  in  any  respect  Avhatsoever — do  you  object  to  that? 

INIr.  SiiER]\rAN,  No ;  I  do  not  object  to  it. 

The  Chairman.  Do  you  think  you  ought  lo  ha\e  a  right  to  do 
that? 

Mr.  Sherman.  I  do  not  object  to  any  part  of  that.  There  is  noth- 
ing in  it  that  is  objectionable,  beyond  the  difficulties  it  might  create 
and  the  annoyances  it  might  give  you;  otherwise  it  is  of  no  con- 
seffuence. 

The  Chairman.  There  won't  be  any  trouble  if  you  deal  fairly  with 
the  merchant,  and  if  you  do  not  deal  fairly  with  him,  then  you  ought 
to  have  trouble? 

Mr.  Sherman.  I  am  speaking  as  a  merchant. 

The  Chair^nian.  I  am  talking  about  steamship  men.  I  can  not 
imagine  how  any  merchant  could  object  to  it.  Of  course,  if  he  is 
a  favored  merchant,  he  -would  object;  just  like  wdien  the  railroads 
were  permitted  to  give  rebates,  and  in  Kansas  City  (that  is  right  at 
my  door)  the  merchants  on  the  first  day  of  the  month  found  envelopes 
on  their  desks  with  their  rebates — the  big  shippers.  They  did  not 
complain;  it  was  the  little  fellow. 

.  Mr.  Sherman.  I  understand.     I  do  not  want  that  at  all.     That  is 
of  no  interest  to  me  from  either  point  of  view. 

Mr.  Hardy.  There  is  one  question,  Mr.  Sherman :  You  say  that 
your  opportunity  as  a  shipowner  W'Ould  be  lost  to  carry  certain 
freight  if  you  were  not  allowed  to  change  rates  without  consultation 
Avith  the  board;  that  while  you  were  doing  that  your  opportunity 
would  be  lost? 

Mr.  Sherman.  No;  I  say  my  opportunity  as  a  merchant  which 
would  enable  me  to  compete  in  business  which  may  come  here  or  to 
go  to  England  may  be  lost. 

Mr.  Hardy.  What  is  there  in  that?  There  is  nothinir  in  that  to 
]5revent  you  naming  a  lower  rate  than  the  maximum  fixed  by  the 
board. 

Mr.  Sherman.  You  can  not  change  without  their  agreement:  you 
have  to  get  the  board  to  let  you  make  the  alterations. 

Mr.  Hardy.  There  is  no  requirement  for  you  to  go  to  the  board 
for  lower  rates,  provided  you  malce  the  i-eductions  uniform  and  non- 
discriminatory. 

Mr.  Sherman.  Yes;  but  a  company  in  transacting  business  can  not 
change  a  tariff  in  order  to  get  large  lots  that  come  at  times.  For 
instance,  suppose  a  man  wants  500  cars  and  a  steamship  comjiany 
wants  to  change  its  tariff,  based  upon  one.  two,  or- three  cars;  he  could 
not  make  any  change  in  his  tariff  to  get  the  contract,  but  the 
European  competitor  does  change  bis  tariff  in  order  to  get  that 
contract. 

Mr.  Hardy.  There  is  nothinir  to  ])i'event  you  from  lowcrimr  youi- 
rates  under  this  bill,  as  T  read  it. 


80  KEGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Sherman.  No;  but  there  is  to  prevent  me  from  imiking  special 
rates  on  special  business. 

Mr.  Hardy.  From  discriminating  with  reference  to  some  par- 
ticular customer,  yes.  I  want  to  ask  you  another  question :  Are  not 
Grace  &  Co.,  the  shipping  company,  a  member  of  conference  agree- 
ments ? 

Mr.  Sherman.  No,  sir;  we  have  no  conference  agreements  in  the 
west  coast  trade. 

Mr.  Hardy.  You  have  not  been  in  any  conferences  ? 

Mr.  Sherman.  No,  sir;  never  have. 

Mr.  Hardy.  The  largest  ship  lines  in  the  world  are  in  them? 

Mr.  Sherman.  Yes;  they  are  in  them. 

Mr.  Hardy.  They  can  not  make  those  changes. 

Mr.  Sherman.  Yes;  they  do.  They  have  what  they  call  "open 
list,*'  which  take  care  of  just  such  occasions  as  that,  and  they  make 
the  rates  for  that  special  business. 

Mr.  Hardy.  So  their  agreements  do  not  amount  to  anything  when 
the  necessity  to  break  them  arises? 

Mr.  Sherman.  No;  there  is  an  agreement  they  may  change  their 
rates  on  those  articles  which  are  on  the  open  list.  That  is  public 
property;  everybody  knows  that. 

Mr.  Hardy.  I  understand  those  agreements  are  pretty  vital  and 
binding. 

Mr.  Sherman.  That  is  part  of  the  agreement;  they  do  not  break 
the  agreement.  There  are  certain  agreements  they  can  not  break, 
but  on  the  open  list  they  can  make  special  arrangements  for  those 
open  lists  without  affecting  the  regular  tariffs. 

ISIr.  Hardy.  But  you  have  here  a  proposition  for  the  board  simply 
to  fix  maximum  rates,  not  minimum  rates,  with  no  provision  that 
you  can  not,  at  any  time,  go  under  that  maximum  rate;  and  if  you 
have  an  opportunity  as  a  shi])per  to  make  such  a  trade  I  take  it  all 
that  would  be  required  would  be  that  the  ship  company  should  treat 
you  just  like  it  did  everybody  else,  and  it  could  not  lower  to  you 
unless  it  was  going  to  lower  to  everybody  else.  Now,  if  your  emer- 
gency requires  special  rates  to  you,  then  I  am  in  favor  of  giving 
them  to  you,  but  I  want  everybody  else  to  have  the  same  oppor- 
tunity you  have. 

Mr.  Sherman.  I  do  not  object  to  that.    I  am  speaking  broadly. 

Mr.  Hardy.  This  law  will  let  the  shipowner  give  you  a  lower  rate, 
provided  it  is  ready  to  give  everybody  else  a  lower  rate  if  they  give 
you  a  lower  rate. 

Mr.  Sherman.  But  this  law  would  involve  a  change,  as  I  under- 
stand it,  of  the  tariffs;  whereas  they  want  a  special  rate  for  a  sjjecial 
job,  that  is  all,  without  affecting  the  ordinary  current  rates.  That 
you  would  probably  call  a  discrimination. 

Mr.  Saunders.  You  mean  to  say  if  you  have  a  correct  application 
of  this  law,  you  suggest  a  situation  in  which  you  are  placed  at  a  dis- 
advantage with  your  foreign  competitor,  because  he  could  make  a 
rate  which  you  could  not  ? 

Mr.  Sherman.  No;  I  say  he  could  make  the  rate  instantly,  while 
I  have  to  go  and  get  the  a]:)pfoval  of  the  board.  That  takes  time, 
and  it  would  mean  we  would  lose  the  business. 

Mr.  Saunders.  Here  is  a  maximum  rate  but  not  a  minimum  rate. 

Mr.  Sherman.  Yes,  sir. 


KlUiUl.ATOlU    FEATURES    OF    SHIPPING    BILL.  81 

Mr.  Saundkhs.  AVhere  is  there  anything  in  tliis  bill  that  woiihl 
prevent  you  from  reducin<r  the  rate  in  order  to  meet  that  com))etition 
which  yon  speak  of? 

Mr.  SiiEUMAN.  1  shoiihl  have  to  make  a  special  rate.  I  do  not 
want  to  reduce  the  rate:  1  want  to  make  a  special  rate. 

Mr.  Saundeus,  That  is  the  same. 

Mr.  SiiEKMAX.  No;  it  would  be  making  one  rate  for  this  special 
transaction  without  reducing  the  current  rates. 

The  Chairman.  Where  is  there  a  line  in  that  bill  that  prevents  it? 

Mr.  Saunders.  I  want  to  know  where  there  is  in  that  bill  anything 
that  prevents  you  doing  that  same  thing? 

Mr.  Byrnes.  I  think,  if  I  may  suggest,  you  have  the  interstate 
commerce  and  the  coastwise  commerce  mixed  up. 

Mr.  Saunders.  I  am  asking  him  to  point  out  the  section  that  is 
his  stumbling  block. 

Mr.  Sherman.  That  very  section  -1  provides  that  it  shall  be  un- 
lawful to  charge,  demand,  collect,  or  receive  from  any  person  or 
persons  by  any  special  rate,  rebate,  drawback,  or  other  device  a 
greater  or  less  compensation  for  any  service  rendered  or  to  be  ren- 
dered in  the  transportation  of  passengers  or  property  subject  to  the 
provisions  of  this  l)ill  than  it  charges,  demands,  collects,  or  receives 
from  am'  other  person  or  persons  for  doing  him  or  them  a  like 
service. 

Mr.  Saunder.  Just  continue  on:  do  not  stop  at  that  point. 

Mr.  Sherman.  For  doing  him  a  like  service. 

Mr.  Saunders.  In  the  transportation  of  a  like  kind  of  traffic  under 
substantially  similar  circumstances  and  conditions? 

Mr.  Sherman.  Yes,  sir. 

]\Ir.  Saunders.  They  are  to  give  effect  to  that. 

Mr.  Sher:man.  You  would  have  to  reduce  your  rate  under  that.  I 
fancy,  for  everyone,  because  you  are  handling  the  same  material  to 
the  same  ports. 

Mr.  Saunders.  Supi)ose  you  do  that  for  the  time  being:  you  can 
not  take  any  more  than  a  particular  amount.  That  would  not  be  a 
discrimination  against  anybody.  You  might  say  under  these  condi- 
tions. "  I  am  willing  to  transport  stuff  to  South  America,"  or  wher- 
ever you  are  going.  "  at  such  and  such  a  rate." 

Mr.  Sherman.  I  do  not  ask  the  transportation  company  to  do  tliat. 
I  only  ask  them  to  make  a  rate  for  this  particular  job;  that  is  all. 

]Mr.  Saunders.  Are  you  s])eaking  from  the  steamship  end  or  the 
other  end  ? 

Mr.  Sherman.  I  am  speaking  from  the  merchant's  end.  because  it 
will  not  enable  the  steamship  company  to  give  that  elasticity  T  want 
to  develop  our  business ;  that  is  all. 

Mr.  Saunders.  Let  us  go  to  the  steamship  end  of  it.  The  steam- 
ship end  of  it  is  the  one  this  bill  deals  with :  not  the  merchandising 
end. 

Mr.  Sherman.  Yes:  this  deals  with  steamshJi)s.  but  it  so  regulates 
the  steamships  as  to  hamper  them  in  giving  the  facilities  we  want  in 
our  merchandising  business. 

Mr.  Saunders.  That  is  what  I  am  trying  to  bring  out.  How  do 
you  think  the  steamship  will  be  hampered  in  doing  that  very  thing? 
Here  is  something  suddenly  develops:  the  steauishi])s  have  been  ti'ans- 

38.534—16 6 


82  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

porting  to  South  America  at  a  reasonable  rate,  and  all  at  once  there 
develops  in  the  world  traffic  a  reduction  of  rates  by  yimv  competitors. 
AVhat  is  there  to  hinder  tlie  steamship  company  from  reducino;  its 
I'ate  to  meet  that  competition?  And  that  would  give  the  advantage 
to  your  merchant  you  are  speaking  of. 

Mr.  Sherman.  That  is  not  quite  the  situation  I  am  trying  to  get  at. 

Mr.  Saunders.  What  do  you  mean  ? 

Mr.  Sherman.  The  situation  is  I  do  not  care  anything  about  the 
regular  rate  if  it  is  on  a  line  with  European  rates.  P^urope  main- 
tains those  regular  rates  on  the  ordinary  transactions,  but  they  make 
special  rates  for  the  big  contracts;  and  I  do  not  see  how  a  steamship 
company  could  give  me  a  s})ecial  rate  for  a  big  contract  without  dis- 
criminating against  some  other  shipper. 

Mr.  Saunders.  Why  not  ^  It  would  offer  those  rates  for  any  big 
contract  of  that  sort:  everyone  with  a  big  contract  of  tliat  sort  would 
be  treated  on  decidedly  the  same  terms. 

Mr.  Sherman.  Yes,  sir;  but  it  would  haxe 

Mr.  Saunders.  Oh.  it  would  have  to  hold  itself  out  to  do  it  for  every- 
body else;  certainly.  It  says  to  everybody  who  comes  along  with  such 
a  contract  as  this,  ''  I  will  give  you  those  rates;  I  am  not  giving  them 
to  this  particular  man,  because  everyone  who  offers  a  contract  of  this 
character  I  will  give  him  those  rates."  What  is  there  to  hinder  a 
steamship  company  from  doing  that,  and  that  would  meet  just  the 
situation  you  have  in  mind  ? 

Mr.  Sherman.  From  my  understanding  of  that  clause,  I  do  not 
think  he  could ;  he  would  have  to  consult  the  board  as  to  whether  those 
rates  were  reasonable. 

Mr.  Saunders.  That  raises  a  question  of  legal  construction;  but  if 
this  enables  them  to  do  that,  your  objection  is  removed  ? 

Mr.  Sherman.  That  would  remove  that  difficulty. 

Mr.  Hadley.  But  3"ou  will  still  have  to  consult  the  board? 

Mr.  Sherman.  You  would  still  have  to  consult  the  board,  which  is 
the  fundamental  objection. 

The  C'HAiiniAN.  No;  tliere  is  nothing  in  there  saying  you  should 
consult  the  board. 

Mr.  Saundkhs.  Where  is  there  anything  saying  you  should  considt 
this  board? 

Ml'.  Sheraian.  You  would  still  have  this  further  objection — if  you 
do  not  have  to  consult  the  board,  it  would  not  matter:  That  if  you 
gave  a  public  hearing  you  would  disclose  the  rate,  which  would  en- 
Mble  the  Kuropean  competitor  to  beat  it;  that  is  all. 

Mr.  SAiNDKiis.  Thci'c  is  iiothina'  in  there  about  a  i)iil)lic  hearing 
at  all. 

Mr.  Shi:i!.man.   No:  nothing. 

Mi-.  Saindeks.  That  is  the  reason  I  was  suggesting  this,  because 
we  want  to  get  at  the  real  difficulties  aiul  want  to  get  at  the  appre- 
hension ])e()i)le  have  about  this  mattcM-,  and  if  the  a])prehension  is 
well  founded  we  will  correct  it. 

Mr.  (iKEi.NE.  Why  should  you  want  this  in  here,  if  it  is  not  going 
(o  aiuounl  to  anything — why  do  you  want  those  things  in? 

Mr.  Saunders.  AVe  are  dealing  with  a  particular  difficulty  Mr. 
Shei-n)an  had  in  mind,  and  we  Avanted  to  ascertain  what  section  of 
the  bill  he  relied  upon  to  create  that  difficulty  for  him. 


EEGULATORY   FEATURES    OF    SHIPPING    BILL,  83 

Mr.  Greene.  If  it  is  not  ^oing  to  be  troublesome  at  all,  wliy  is 
it  there  ? 

The  Chairman.  It  would  be  troublesome  in  certain  e\ents,  but  not 
the  event  he  had  in  mind. 

Mr,  Saunders.  This  is  intended  to  prevent  discrimination,  but  not 
to  prevent  what  he  has  in  mind.  That  is  what  T  am  trying  to  bring 
out. 

Mr.  Sherman.  Our  business  is  largely  competitive  with  Europe: 
we  must  have  the  same  facilities  they  have.  And  after  all,  they  have 
built  up  their  commerce  without  any  rate  regulation  oi-  anything  of 
this  sort  and  our  own  is  now  developing  pretty  well. 

The  Chairman,  You  would  like  to  have  a  free  hand? 

Mr,  Sherman,  We  Avould,  sir.  We  have  an  opportunity  to-day 
that  comes  once  in  half  a  dozen  lifetimes  and  we  want  the  freest 
possible  hand  to  take  ad\"antage  of  it. 

Mr.  Saunders.  W"e  want  to  give  you  a  free  hand  for  development. 

Mr.  Sherjian.  Our  own  exports  to  South  America  since  1904:  have 
increased  from  40,000,000  to  over  3-20.000,0O0,  and  our  imports  from 
53,000.000  to  107.000.000. 

The  Chairman.  But  we  don't  want  you  to  suggest  difficulties  that 
do  not  present  themselves  in  this  bill. 

Mr.  Sherman.  That  would  present  itself  in  any  bill.  We  want 
freedom;  we  Avant  to  be  left  where  we  are:  we  want  to  be  left  to 
compete  on  the  same  basis  that  Ave  have  to  meet  German  and  English 
competition. 

The  Chairman.  You  are  setting  up  men  of  straw  and  then  knock- 
ing them  down ;  we  want  legitimate  objections  to  this  bill.  If  there 
is  anything  in  it  that  operates  to  the  prejudice  of  you  as  a  merchant 
and  shipowner,  we  want  to  know  what  it  is ;  but  we  do  not  want  you 
to  state  things  that  do  not  exist  under  the  provisions  of  the  bill,  as  we 
understand  it, 

Mr,  Saunders,  We  want  to  keep  out  anything  that  will  hinder  or 
hamper, 

Mr,  Sherman,  The  whole  object  of  this  bill  is  to  do  that,  as  I 
understand  it, 

Mr,  Saunders,  What? 

Mr,  Sherman,  It  is  to  provide  for  the  control  of  rates, 

Mr.  Saunders.  It  provides  for  the  regulation  of  rates. 

Mr.  Sherman.  For  the  regulation  of  rates. 

Mr.  Saunders.  If  you  want  to  pick  out  any  features  there  we 
would  be  very  glad  to  have  you  do  that. 

Mr.  Sherman.  Mr.  Franklin  has  already  covered  that,  so  there  is 
not  much  use  for  me  to  go  over  the  same  ground,  because  anything 
I  would  have  to  say  would  simply  be  a  repetition  of  what  he  has 
already  stated. 

Mr.  Saunders.  On  the  ]:>arti('ular  feature  to  Avhich  I  have  directed 
your  attention,  I  understand  you  agree  if  this  laAv  Avill  allow  you 
as  a  shipowner  to  meet  such  a  situation  as  you  presented,  from  the 
point  of  view  of  the  merchant,  then  you  have  no  objection  to  it? 

Mr.  Sherman,  I  Avas  not  speaking  from  the  point  of  view  of  the 
shipowner  that  I  want  to  make  such  a  rate;  I  am  speaking  from  the 
point  of  vieAv  of  the  merchant,  I  Avant  to  go  to  some  other  steam- 
ship company  and  have  them  free  to  make  me  that  rate. 


84  REGULATOEY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Saundeijs.  I  am  trying  to  get  you  to  ))oint  out  wherein  this 
bill  would  hinder  you  in  doing  that  ^ 

Mr.  EnaroNDS.  It  was  stated  in  the  committee  the  other  day,  Mr. 
Sherman,  in  discussing  the  first  paragraph  of  section  4,  that  if  the 
ship  was  in  a  harbor  aiad  had  a  half  a  cargo  of  coal  offered  it  at  a 
dollar  rate  and  could  not  get  any  other  cargo,  and  some  other  shipper 
came  along  and  said,  "  I  will  giYe  you  the  balance  of  that  ballast  in 
coal  at  75  cents,"  and  rather  than  ballast  up  or  go  empty  he  took  that 
second  cargo,  that  would  come  under  the  head  of  this  substantially 
similar  circumstances  and  conditions  and  would  excuse  him  for 
making  that  rate. 

Mr,  Sherman.  Suppose  that  happens  now,  and,  in  order  not  to 
go  empty,  you  were  obliged  to  take  it  at  75  cents  and  a  dollar? 

Mr.  Edimonds.  It  would  not  l)e  under  the  same  circumstances.  I 
brought  that  question  up  in  the  committee  and  Judge  Saunders,  wdio 
has  spoken  of  it  here,  said  that  a  condition  like  that  might  exist. 
And  :sYhat  would  happen  if  it  did?  Here  are  two  separate  shippers 
filling  the  ship  with  the  same  commodity;  one  is  going  at  one  rate 
and  another  at  another  rate;  and  the  committee  in  talking  it  over 
said  that  under  this  clause  "  substantially  similar  circumstances  and 
conditions"  I  would  be  excused  in  making  that  second  rate. 

Mr.  Sherman.  I  do  not  quite  gather,  then,  wdiat  is  the  object  of 
your  bill;  Avhat  advantage  does  anybody  get  out  of  the  bill? 

The  Chairman.  There  are  two  shippers  there  at  the  same  time.  I 
can  tell  you  just  exactly  what  advantage  you  get.  Here  is  a  ship  on 
the  berth  in  Philadelphia,  loading  with  coal;  one  man  only  has  half 
a  cargo  and  both  want  to  ship;  you  let  one  man  have  the  dollar  rate 
and  the  other  the  75-cent  rate;  do  you  think  that  is  fair?  Would 
you  want  to  have  that  privilege  of  loading  both  at  the  same  time  in 
all  tonnage? 

Mr.  Sher3ian.  No. 

The  Chairman.  That  is  what  we  intend  to  prevent  by  this  bill. 

Mr.  Sherman.  You  say  you  can  do  that  in  case  the  vessel  is  short 
of  a  cargo — to  fill  it  up  at  a  cheaper  rate? 

Mr.  Loud.  If  the  first  half  would  not  make  sufficient  ballast,  he 
would  be  entitled  to  do  that  to  get  a  full  ballast — he  would  have  two 
prices  on  the  same  cargo  and  they  would  both  be  reasonable. 

Mr.  Saunders.  They  might  be. 

Mr.  Greene.  And  he  might  be  fined  the  penalty  provided  in  the 
bill  and  be  subject  to  imprisonment. 

Mr.  Saunders.  You  observe  that  is  reasonable,  and  that  is  ]:)re- 
cisely  what  Mr.  Sherman  wants  to  do — that  very  thing;  and  we  are 
simply  pointing  out  to  him  that  the  bill  allows  him  to  do  that. 

Mr.  Edmonds.  That  is  the  question  I  brought  up.  I  also  brought 
up  the  question  that  a  ship  might  take  freight  to  Alanila  and  Hong- 
kong, running,  say,  to  both  places,  and  might  make  the  same  rate 
from  Hongkong  to  San  Erancisco  as  it  did  from  Manila  to  San 
Francisco,  although  the  boat  Avould  travel  GOO  miles  farther  in  going 
to  Hongkong  than  in  going  to  Manila ;  and  you  said  that  if  they 
charged  a  higher  rate  there,  owing  to  the  difference  in  the  distance 
carried,  it  would  be  perfectly  legitimate  under  this  clause  of  sub- 
stantially similar  circumstances  and  conditions. 

Mr.  Sherman.  Under  the  rates  to-day,  in  a  number  of  trades,  you 
frequently  get  twice  the  haul  for  less  money.    Eor  instance,  you  take 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  85 

the  I'iite  New  York  to  Valparaiso  via  Panama,  and  the  rate  Kiel  to 
Valparaiso  via  Magellan,  which  is  2,000  to  2,500  miles  farther. 
Although  the  rate  is  less  from  New  York  that  is  due  to  the  fact 
that  the  Panama  Railroad  has  got  to  compete  with  Europe  via 
Magellan,  and  has  to  take  a  lower  rate. 

Mr.  Saundj^rs.  That  is  tlie  verv  reason  this  language  is  put  into 
the  bill. 

Mr.  Hadley.  But  would  not  the  fact  remain  in  ever}'  case  that  it 
would  be  a  question  of  fact  to  be  determined  by  the  tribunal  as  to 
whether  the  conditions  were  similar  or  not,  before  you  would  know 
whether  you  could  make  the  rate  ? 

Mr.  Sherman.  Ocean  rates  are  not  a  question  of  cost  and  distance. 
The}'  are  a  question  of  competitive  conditions.  The  field  is  wide  open 
and  you  have  to  make  -rates  that  will  get  the  business.  The  world 
rates  to-day  are  abnormally  high  everywhere.  You  say  the  rates  are 
outrageous  to  the  exporter — and  they  certainly  are  enormously  high; 
but  we  have  not  had  ships  enough  to  move  the  tonnage  in  New  York. 
Under  our  rates  we  have  to  get  trans-Atlantic  ships,  and  if  the 
rates  were  unbalanced  we  could  get  all  the  ships  in  the  world  coming 
in  and  taking  the  stuff  out,  but  they  have  not  done  so.  I  know,  as 
a  matter  of  fact,  that  the  rates  from  Argentine  to  Europe  have  been 
higher  than  from  the  United  States  constantly  for  the  last  six  or 
eight  months. 

Mr.  P^DMONDS.  Is  it  not  true  in  the  case  of  the  seller  of  the  goods, 
in  a  great  many  cases  he  has  made  the  rates  himself  by  competitive 
bidding? 

Mr.  Sherman.  You  mean  the  purchaser  of  the  goods? 

Mr.  Edmonds.  Either  one.  The  shipping  man  has  nothing  to  do 
with  it.  he  simply  sits  back  and  takes  the  best  offer  he  can  get,  and 
he  gets  it  either  from  the  man  who  wants  to  purchase  or  the  man  who 
wants  to  sell  the  goods. 

Mr.  SiiER^iAx.  It  is  a  question  of  supply  and  demand;  and  if  he 
goes  out  in  the  market  and  they  want  $1,600,  if  the  shipper  can  get 
another  ship  cheaper,  why,  he  does  not  pay  it. 

Mr.  Edmonds.  Have  not  people  come  into  your  office  and  offered 
higher  rates  for  moving  certain  stuff? 

Mr.  Sherman.  Oh.  yes:  they  have  made  all  sorts  of  offers.  AVe 
have  had  them  offer  much  higher  rates  than  we  could  get  in  other 
routes;  certainly. 

Mr.  Ed:monds.  That  is.  a  case  where  they  made  the  rates  them- 
selves ? 

Mr.  Sherman.  Frequently  they  make  the  offer  because  they  can 
not  get  anything. 

Mr.  Greene.  Let  me  see  if  I  understand  you  correctly.  As  I  under- 
stand you,  if  you  are  in  the  market  competing  with  a  foreign  ship- 
owner and  a  foreign  merchant,  they  are  at  liberty  to  make  such  rates 
as  they  please  and  such  agreements  as  they  please,  but  you  would  be 
handicapped  because  you  could  not  make  an  agreement  under  this 
bill? 

Mr.  Sherman.  We  could  not. 

Mr.  Greene.  This  bill  ties  your  hands  and  ties  your  feet  so  you 
can  not  make  an  agreement  unless  you  get  in  communication  with  the 
board  and  get  them  to  act? 

Mr.  Sherman.  In  Washington  here. 


86  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

The  CiiAiHMAN.  I  will  give  a  new  hat  if  he  shows  where  that  is 
true. 

Mr.  Greene.  I  do  not  care  whether  he  shows  it,  that  is  the  belief. 

The  Chairmax.  I  will  giAe  a  new  hat  if  yon  can  show  Avhere  that 
is  in  the  bill. 

Mr.  Greene.  That  is  all  right,  I  am  not  betting  hats;  I  am  asking 
the  plain  question  of  what  the  effect  of  the  laAv  is. 

The  Chairman.  He  can  not  answer  fi-om  that  bill  and  show  us 
where  it  is  true. 

Mr.  Greene.  This  gentleman  is  here — a  man  who  has  had  wide 
experience.  He  says  he  has  been  connected  in  the  business  for  over 
50  years  and  has  had  a  wide  experience  both  wdth  foreigners  and 
Americans.  And  then  I  ask  the  plain  question,  if  his  competitor  can 
make  an  agreement  wdthout  conferring  with  anyboclj^,  just  as  he 
Avants  to,  being  perfectly  free  to  make  it,  and  this  witness,  being  an 
American  shipper  and  going  out  of  an  American  port  like  New 
York — whether  or  not  this  bill  would  not  put  him  at  a  disadvantage? 
That  is  what  I  Avant  to  get  at. 

Mr.  Sherman.  Yes;  it  certainly  Avould,  because  the  other  man  is 
free  and  I  am  not. 

Mr.  Greene.  Whether  he  explains  the  difference  or  does  not,  the 
bill  puts  him  at  a  disadvantage — whether  he  picks  out  "A"  here  or 
"  B  "  there. 

]\Ir.  Saunders.  Now,  Mr.  Sherman,  your  competitor  would  not  be 
at  a  disadvantage  by  being  compelled  to  charge  higher  rates  than  }- ou, 
that  is  certain? 

Mr.  Sherman.  No. 

Mr.  Saunders.  Then,  in  order  to  be  at  a  disadvantage  he  must  be 
in  a  position— in  competition — where  he  can  charge  lower  rates  than 
you?    That  is  the  only  way  to  put  you  at  a  disadvantage? 

Mr.  Sherman,  No;  he  can  make  rates  without  consulting  anyone; 
he  is  free  and  he  can  act  instantly. 

Mr.  Saunders.  He  must  then  be  able  to  give  better  rates  than  you? 

Mr.  Sherman.  He  may  be  and  may  not. 

Mr.  Saunders.  If  he  charged  higher  rates  than  you,  that  certainly 
is  not  going  to  put  you  at  a  disadvantage.  Now,  take  the  bill  and 
show  Avhere  in  any  section  you  have  in  mind,  or  combination  of 
sections,  your  competitor  is  able  to  act  more  instantly  than  j^ou  for 
the  purposes  of  competition,  and  charge  a  more  desirable  rate  than 
you  for  the  purpose  of  competition?  We  all  agree  that  if  this 
l)ill  is  going  to  ham])er  American  commerce  and  put  you  at  a  disad- 
\  antage  and  bring  the  other  fellow  in  and  jnit  the  American  out,  it 
is  a  Ijad  l)ill;  and  the  way  to  do  is  to  take  the  bill  and  point  out  the 
sections  that  will  operate  to  that  end. 

Mr.  Sherman.  Yes,  sir. 

Mr.  Saunders.  Now.  take  up  the  one  you  have  in  mind,  or  the 
two.  or  whatever  it  is. 

Mr.  Sher.man.  The  clause  I  just  read.  Of  course  you  say  you 
uHtdify  that. 

Mr.  Saunders.  You  say  if  that  clause  has  the  meaning  that  w^e 
attribute  to  it,  you  have  no  objection  to  it? 

Mr.  Sherman.  No;  I  have  not  made  myself  clear  on  that.  I 
object  to  any  restrictions  at  all.     As  I  said  at  the  beginning,  I  want 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  87 

to  be  as  free  to  do  business  in  any  way  that  suggests  itself  from  day 
to  day  or  minute  to  minute  as  the  man  I  compete  with. 

Mr.  Saunders.  As  your  competitor? 

Mr.  Sherman.  As  my  competitor. 

Mr.  Saunders.  Show  us  where  you  are  not  just  as  free  to  do  busi- 
ness as  your  competitor !' 

Mr.  Sherman.  In  England  or  in  (lermany  my  competitor  has  no 
restrictions  whatever;  he  does  not  have  to  ask  anybody  to  wait  a  little 
while  to  see  whether  he  can  do  it,  or  to  wonder  whether  a  board  will 
place  this  construction  on  it  or  that;  he  goes  ahead  and  does  it. 

Mr.  Saunders.  You  are  stating  things  not  in  the  bill.  Just  get 
down  to  the  bill.  Have  you  in  mind  a  German  competitor  trading 
out  of  New  York  to  Buenos  Aires  ? 

Mr.  Sherman.  No,  sir;  because  he  has  to  meet  the  same  conditions 
I  have.     I  am  talking  about  the  man  who  goes  to  Hamburg. 

Mr.  Saunders.  Who  ha\e  you  in  mind? 

Mr.  Siierjman.  The  German  shipper  over  the  German  lines  to  the 
west  coast  of  South  America  from  Hamburg,  the  Swedish  shipper, 
or  the  English  shipper  on  any  of  the  English  lines  from  a  British 
port. 

Mr.  Saunders.  Have  you  in  mind  now  shippers  on  your  vessels 
from  British  ports  to  South  American  ports? 

Mr.  SiiER>rAN.  I  am  not  having  in  mind  my  vessels  at  all:  I  am 
talking  purely  as  a  merchant. 

Mr.  Saunders.  We  are  talking  about  .ships,  not  merchants. 

Mr.  Sherman.  I  am  talking  about  the  way  it  will  injure  American 
trade. 

Mr.  Saunders.  We  just  ha^e  in  mind  the  shipowners — the  Ameri- 
can capital  in  ships. 

Mr.  (Greene.  Are  you  not  interested  in  American  trade? 

Mr.  Saunders.  Yes. 

JNIr.  Sheriman.  Mr.  Franklin  has  gone  into  the  bill  from  the  ship- 
owner's point  of  view.  There  is  no  use  of  my  going  over  the  same 
ground,  because  I  would  merely  be  repeating  what  he  has  already 
said. 

Mr.  Saunders.  But  you  are  i)ointing  out  difficulties. 

Mr.  Sherman.  My  ol)jection  is  raised  as  a  merchant  and  not  as  a 
shipowner.  Mi".  Franklin  has  taken  cai'e  of  the  shipowner's  side  of 
the  question. 

Mr.  Saundei!S.  ^'ou  are  pointing  out  difficulties  with  respect  to 
which  this  bill  does  not  undertake  to  deal  at  all. 

Mr.  Sherman.  I  agree  with  you  it  does  not. 

Mr.  Saunders.  The  difficulties  you  have  in  mind  we  are  not  deal- 
ing with,  because  we  can  not  deal  with  them.  You,  as  an-  exporter 
or  as  a  merchant,  can  make  any  rates  at  all  that  you  want  with  the 
German  shii)s  plying  from  Hamburg  to  South  America. 

Mr.  Sherman.  I  know  that;  but  I  can  not  increase  my  American 
business  by  doing  that. 

Mr.  Saunders.  What  I  want  to  point  out  is  liow  this  bill  operates. 
Ha^■e  you  in  mind  American  ships  plying  from  our  ports  to  South 
America  and  German  ships  plying  from  our  ports  to  South  America 
that  it  would  put  the  American  line  of  ships  at  a  disadvantage  in 
dealing  with  the  .American  exporters  as  compared  with  the  German 
line? 


88  REGULATORY    FEATI^RES    OF    SHIPPING    BILL. 

Mr.  Stikuman.  There  is  no  difference  there.  <is  you  apply  the  same 
law;  they  are  both  under  the  same  disadvantage. 

Mr.  Sauxdi:i;s.  Then  thei-e  is  nothinji;  in  this  bill — >ve  will  just 
leave  tlfe  merchants  out  for  the  time  being — which  will  operate  to 
the  disadvantage  of  the  American  shi]:)owners  and  the  capitalists 
l)utting  money  in  ships,  is  there?    If  there  is.  what  is  that  thing? 

Mr.  Shkrman.  I  do  not  raise  any  question  of  that  sort  under  this 
law,  of  ships  plying  in  the  same  trade:  that  is.  trade  from  the  United 
States.  They  do  not  try  to  discriminate  against  the  American  shi])- 
])ei's  there.  I  claim  it  is  brcader  than  that:  that  it  will  tend  to 
hamper  the  development  of  American  trade  in  competition  Avith  the 
European  trade,  that  is  all. 

Mr.  Sattndeks.  I  will  not  take  up  that  i)hase  of  it:  we  are  dealing 
Avith  a  shipping  bill. 

Mr.  Byr>'es.  Yonr  idea  is.  as  a  merchant,  that  if  you  want  a  ship- 
oAvner  at  your  port  to  ship  a  cargo  to  South  America  and  you  asked 
for  a  special  rate  for  this  very  large  cargo,  the  shi]:)OAvner  AA'ould 
hesitate  to  make  you  that  rate  because  he  would  be  in  doubt  as  to 
whether  or  not  it  Avould  be  construed  as  being  substantially  similar 
circumstances  and  conditions:  and  by  reason  of  his  refusing  to  make 
you  a  special  rate  it  Avould  put  you  at  a  disadvantage  Avith  your  for- 
eign competitor  ? 

Mr.  Sherman.  That  is  exactly  it.  You  have  to  discuss  whether  he 
can  do  it.  and  in  the  meantime  your  oi)portunity  is  gone. 

Mr.  Byrnes.  If  that  section  is  modified  in  any  Avay  Avhereby  he 
Avould  have  no  doubt  about  his  ability  to  make  that  special  rate  for 
that  cargo,  then  you  Avould  have  no  ol)jection? 

Mr.  Sherman.  Then  I  Avould  l)e  that  much  better  off.  The  rea- 
son I  am  making  the  objection  noAv  is  that  you  can  not  foresee  all  the 
conditions  that  Avill  arise  from  day  to  day  in  the  shipping  business, 
and  on  the  other  side  they  have  no  limitation  at  all;  they  can  go 
ahead  is  they  like. 

Mr.  Byrnes.  I  am  asking  you  about  this  particular  section  that  I 
have  referred  to  and  of  Avhich  you  have  spoken;  if  that  is  removed, 
then  what  other  objection  have  you  to  that  section^  Ia4  us  stick  to 
that  one;  that  is  the  (me  you  have  referred  to. 

Mr.  SiiERiMAN.  Section  4,  the  first  ]iaragrni)h,  is  what  I  objected  to. 

Mr.  Byrnes.  You  and  I  have  agreed,  now,  if  that  is  removed  you 
luive  no  objection? 

Mr.  Sherman.  Would  there  be  any  objectum  to  ])utting  in  that  the 
carrier  may  make  special  rates,  a  specific  statement,  for  certain  lots 
of  cargo  at  certain  times,  :md  those  i-ates  shall  not  atFect  the  general 
tariff?     I  am  speaking  now  from  the  steamshij:)  ])oint  of  vieAV. 

Mr.  r>YRNES.  If  that  is  arranged  hereafter,  what  othei-  objectior^ 
haA'e  you? 

Mr.  Sherman.  To  that  secticm? 

Mr.  Byrnes.  To  that  whole  section. 

Mr.  Sherman.  I  have  no  objection  to  the  rates  being  made  the 
same  for  all;  that  is  the  essence  of  that  section. 

Mr.  Byrnes.  The  only  other  objection  you  have  made  to  the  bill 
is  the  maximum  rate  provision,  is  it  not? 

Mr.  Sherman.  Certainly. 

Mr.  Saunders.  I  said  I  Avould  not  ask  you  any  (luestion  from  the 
point  of  view  of  the  shipper,  but  I  will  ask  you  one.    The  difficulty 


REGULATORY    FEATURES    OP    SHIPPING    BILL.  89 

you  have  in  mind  from  the  viewjDoint  of  the  shipper,  as  you  outlined 
in  your  answer,  is  that  you  are  afraid  when  you  approach  the  Ameri- 
can shipowner  he  would  not  be  able  to  deal  with  you  as  promptly 
as  the  treatment  3  our  foreign  competitor  would  receive.  If  under 
this  bill  the  American  shipowner  is  able  to  deal  with  you,  as  an 
American,  as  promptly  as  the  foreign  shipowner  is  in  a  position  to 
do  with  your  competitor,  that  is,  to  give  you  as  prompt  an  answer, 
then  there  is  no  objection  from  that  standpoint. 

Mr.  Sherman.  If  he  is  able  to  deal  as  promptly  and  freely  as  the 
other  fellow,  no. 

Mr.  Saunders.  It  is  our  interpretation  this  bill  would  do  that.  It 
is  a  mere  question  of  interpretation. 

Mr.  Sherman.  My  interpretation  is  the  bill  is  a  hindrance;  that 
is  all. 

The  Chairman.  We  have  no  patience  with  that  view ;  I  have  not, 
at  least. 

Mr.  Saunders.  That  was  the  objection  of  all  the  railroads  to  the 
regulation  that  the  Interstate  Commerce  Commission  placed  upon 
them — that  they  ought  to  be  left  alone. 

The  Chairman.  That  is  the  argument  the  railroads  made — just  let 
us  alone. 

Mr.  Sherman.  The  railroads  are  quite  different.  You  have  trans- 
portation here  that  is  open  to  everybody ;  it  is  wide  open.  Anybody 
can  engage  in  it  and  it  is  wide  open. 

The  Chairman.  This  report  on  the  investigation  of  shipping  com- 
binations shows  that  is  not  a  fact;  and  if  you  will  read  that  report 
and  tlie  hearings,  you  will  conclude  it  is  not  the  fact. 

Mr.  Sherman.  It  is  substantially  the  fact. 

The  Chairman.  The  combinations  on  the  seas  prior  to  this  war 
were  quite  as  close  and  effective  betAveen  all  of  the  regular  lines  as  on 
the  land. 

Mr.  Loud.  Before  this  witness  leaves  I  Avish  to  have  such  informa- 
tion as  he  can  give  us  of  the  cost  of  operating  under  the  American 
flag  and  the  foreign  flag. 

The  Chairman.  He  can  go  into  that  after  lunch. 

(Thereupon,  at  12.55  o'clock  p.  m.,  a  recess  was  taken  until  2  o'clock 
p.  m.) 

ak'J'er  recess. 

The  committee  reconvened  at  2.30  o'clock  p.  m.,  pursuant  to  the 
taking  of  the  recess. 

STATEMENT  OF  MR.  LAWRENCE  K.  SHERMAN— Continued. 

Mr.  Hadley.  Reference  was  made  by  Mr.  Bush  in  introducing  you, 
Mr.  Sherman,  that  you  had  some  statistical  data,  either  in  mincl  or  at 
hand,  on  the  difference  in  cost  of  operating  ships  under  the  American 
flag  and  foreign  flags,  and  Mr.  Loud  was  seeking  to  have  it  presented 
to  the  committee,  giving  them  information  on  the  difference  of  cost 
between  here  and  abroad. 

Mr.  Sherman.  The  difference  on  the  ships  we  have  transferred  is 
from  $700  to  $800  a  month. 

Mr.  RowE.  What  grade  of  ship  is  that? 


90  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Sher:man.  Tluit  is  a  ship  of  9,600  tons  total  dead-weight 
cargo  boat — an  ordinary  English  cargo  boat. 

Mr.  Gkeenp:.  xVs  1  understand  it,  under  the  American  flag  you  had 
to  pay  that  much  nioi-e  ^ 

Mr.  Sherman.  Dii'cctly  we  transferred  the  boats.  Now,  the  cost 
is  increasing;  both  costs  are  increasing. 

The  Chairman.  Why  did  you  transfer  your  vessels  to  the  Ameri- 
can flag? 

Mr.  Sherman.  We  thought  it  was  a  good  thing  to  do  after  the  war 
broke  out,  of  course,  under  this  law,  and  we  transferred  several;  but 
we  still  have  six  under  the  l>ritish  flag.    We  did  not  transfer  them  all. 

The  Chairman.  Did  you  invite  this  increased  cost  for  no  other  rea- 
son than  you  wanted  to  get  them  under  the  American  flag? 

Mr.  Sherman.  I  beg  your  pardon. 

The  Chairman.  Whj'-  did  you  incur  this  additional  cost? 

Mr.  Sherman.  Because  we  thought  it  advisable  to  get  them  under 
the  American  flag,  in  view  of  the  war ;  that  is  all. 

The  Chairman.  Why  was  it  advisable  to  put  them  under  the 
American  flag  during  the  war? 

Mr.  Sherman.  Because  we  lost  two  ships  under  the  British  flag. 
They  w  ere  sunk  by  German  cruisers.  We  thought  it  safer  to  get  them 
under  the  American  flag  after  w^e  lost  those  two  ships. 

The  Chairman.  For  the  protection  of  the  flag? 

Mr.  Sherman.  Yes,  sir. 

The  Chairman.  How  many  ships  do  you  operate? 

Mr.  Sherman.  Sixteen. 

The  Chair:man.  Are  you  compelled  to  have  larger  crews? 

Mr.  Sherman.  Yes;  the  crews  are  larger  and  the  wages  are  more. 

The  Chairman.  Now,  just  for  the  information  of  the  committee, 
how  many  more  men  do  you  have  to  have  in  a  crew — just  a  general 
statement ;  we  will  not  go  into  detail  ? 

Mr.  Sherjian.  I  think  it  is  three  or  four  more  men ;  I  am  not 
certain. 

The  Chairman.  On  these  ships  how  many  men  are  there  in  the 
crew,  in  all  departments? 

Mr.  Sherman.  Thirty-nine  or  forty. 

Mr.  RowE.  About  10  per  cent  more? 

Mr.  Sherman.  Yes. 

The  Chairman.  Where  is  that  increase — in  the  deck  crew  or  the 
engine  room,  or  in  what  department  of  the  ship? 

Mr.  Sherman.  I  could  not  answer  that  question.  I  am  not  in 
charge  of  the  operation  of  the  shii)s,  and  T  do  not  know  generally. 
I  can  send  that  data  if  you  like. 

Mr.  Greene.  You  can  furnish  it? 

Mr.  Sherman.  I  can  furnish  it,  absolutely;  yes,  sir. 

Mr.  Hadley.  I  wish  you  would  do  that. 

Mr.  Sherman.  Certainly. 

Mr.  Edmonds.  Will  you  show  that  in  detail  ? 

Mr.  Sherman.  Certainly.    No  objection  at  all. 

The  Chairman.  What  is  the  name  of  the  ship  ? 

Mr.  Sherman.  The  (^hincha. 

The  Chairman.  I  am  much  obliged  to  vou,  Mr.  Sherman. 


REGULATOEY    FEATURES    OF    SHIPPING    BILL.  91 

STATEMENT  OF  MR.  GEORGE  S.  DEARBORN,  PRESIDENT  AMER- 
ICAN-HAWAIIAN STEAMSHIP  CO.,  NEW  YORK,  N.  Y. 

Mr.  Dearborn.  Mr.  Bush  said  I  was  a  member  of  this  committee 
of  the  chamber  of  commerce  Avhich  has  to  deal  with  the  features  of 
the  bill  pertaining  to  foreign  trade.  Of  course,  the  company  I 
represent  is  in  the  coastwise  trade;  that  is,  during  normal  times. 
The  ships  are  now  distributed  in  the  foreign  trade.  So  my  state- 
ment will  be  particularly  in  regard  to  what  I  call  a  technical  point — 
this  rate-making  power.  I  am  speaking,  you  might  say.  for  tlie 
American  Line  Steamship  Co. 

I  beg  to  remonstrate  against  those  provisions  of  the  bill  which 
w^ould  give  the  shipping  board  the  power  to  fix  rates  for  water  car- 
riers, and  would  prohibit  any  change  in  rates  except  upon  10  days' 
notice;  first,  upon  the  principle  that  the  water  carrier  receives  noth- 
ing from  the  State,  that  the  ships  are  operating  out  of  the  jurisdic- 
tion of  the  State  most  of  the  time,  and  that  owners  can  not  be  com- 
pelled to  operate  their  ships. 

The  status  of  water  carriers  is  entireh^  different  from  that  of  rail- 
roads, which  have  a  franchise  and  the  right  of  eminent  domain,  and 
are  compelled  to  operate.  A.ship's  status  is  no  different  from  that  of 
a  manufacturing  concern;  in  fact,  a  ship  is  a  manufacturing  plant, 
producing  transportation.  Therefore  the  earning  power  of  ships 
should  not  be  fixed  any  more  than  that  of  any  other  industry  and 
should  be  governed  by  conditions  of  supply  ancl  demand. 

To  apply  rate-making  powers  would  be  most  difficult  and  in  prac- 
tice would  make  the  business  of  the  water  carriers  unworkable.  It 
would  be  necessary  to  define  a  reasonable  rate.  This  would  be  com- 
paratively simple  if  relativeness  of  rates  in  other  trades  were  to  be 
considered;  but  if  it  is  the  purpose  of  this  bill  to  fix  a  rate  based 
upon  a  return  upon  the  investment  the  cost  of  every  individual  ship 
of  a  fleet  in  a  service  would  have  to  be  considered,  and  as  the  cost  of 
ships  in  commission  to-day  vary  from  $40  to  $180  per  ton ;  therefore 
different  rates  would  have  to  be  applied  to  different  ships.  Ships 
that  are  being  built  to-day  will  cost  100  per  cent  more  than  most  of 
the  ships  now  in  commission;  therefore  a  reasonable  rate  for  the 
new  ships  would  be  an  excessive  one  if  applied  to  old  ships. 

Ships  are  of  all  sizes  and  types  and  can  not  be  treated  alike  in 
the  application  of  rates.  Some  are  designed  for  special  trades  and ' 
are  very  much  more  efficient  in  handling  cargces  peculiar  to  those 
trades.  A  tramp  steamer  has  no  overhead  charges,  while  there  is 
applied  to  steamers  comprising  a  fleet  in  a  regular  service,  a  large 
expense  for  terminals.  The  American-Hawaiian  Steamship  Co., 
tor  instance,  with  its  26  steamers,  in  the  coast-to-coast  service,  has  a 
rental  expense  for  terminals,  which,  if  capitalized,  would  amount  to 
$5,000,000,  or  about  one-quarter  of  the  cost  of  the  ships. 

The  power  to  fix  rates  implies  that  carriers  would  be  compelled  to 
take  all  freight  offered,  which  would  be  impracticable  in  the  case  of 
a  ship.  A  snip,  the  water  carrier's  unit,  is  inffexible.  There  would 
be  only  a  certain  number  of  ships  to  deal  with,  and  the  character  of 
the  cargo  each  ship  could  carry  would  be  governed  by  conditions  dur- 
ing different  stages  of  her  loading.  A  ship  requires  a  limited  amount 
of  bottom  cargo,  then  medium  and  light  measurement  freight.     The 


92  REGULATORY    FEATURES    OF    BllIPPlXG    BILL. 

stabilit}-  of  a  ship  has  to  be  considered,  as  well  afe  a  pi()i)er  phice  to 
stow  freight  that  could  damage  other  freight. 

So  that,  under  all  of  these  conditions,  which  actually  exist  in  the 
operation  of  ships,  a  tariff  would  be  inelfective,  as  ships  would  not  be 
physically  (pialilied  to  take  all  of  the  freight  covered  by  it.  Fixing 
rates  and  filling  tariffs  would  not  provide  space  in  ships  but  place 
a  burden  upon  the  shipowners  with  no  compensating  benefits  to  the 
shippers.  The  requirement  of  a  10-day  notice  before  a  change  could 
be  made  in  a  tariff  -svould  deprive  the  ship  of  a  class  of  freight  that 
Avould  be  necessary  to  complete  her  loading  and  freight  that  was 
available  at  short  notice,  and  also  deprive  the  shipper  of  such  freight 
of  the  space  in  the  ship.  Tramp  steamers  which  go  on  the  berth  to 
load  from  time  to  time,  and  are  really  the  most  effective  rate  regu- 
lators for  regular  lines,  would  find  it  very  difficult  to  secure  freights 
under  the  regulations  proposed,  and,  certainly,  there  should  be  no 
discrimination  made  by  statute  between  individual  ships  designated 
as  tramp  steamers  and  those  that  comprise  a  fleet  under  one  manage- 
ment. The  tramp  steamer  would  disappear  in  a  trade  under  regu- 
lation, which  would  remove  that  competition  from  the  regular  lines, 
whereas  if  they  are  exempted  they  would  become  unfair  competitors. 

The  American-Hawaiian  Steamship  Co.  has  been  transporting  the 
Hawaiian  Island  sugar  crop  to  the  Atlantic  coast  for  10  years  under 
a  contract  at  a  rate  of  freight.  If  the  shipping  board  has  the  rate- 
making  power,  could  it  not  say  that  the  rate  which  has  been  mutually 
agreed  upon  by  the  shipper  and  the  steamship  company  was  unrea- 
sonable, and  this  would  give  the  board  the  powder  to  abrogate  the 
contract.  Under  such  conditions,  a  steamship  company  would  hardly 
enter  into  a  contract,  and  the  shippers  whose  transportation  require- 
ments are  for  300,000  tons  annually  would  be  deprived  of  a  re- 
liable service  which  they  absolutely  depend  upon.  The  American- 
Hawaiian  Steamship  Co.,  when  it  resumes  its  regular  service  through 
the  Panama  Canal,  will  find  its  rates  fixed  to  a  minimum  by  the  radi- 
cal reduction  made  by  the  transcontinental  railroads  for  the  purpose 
of  competing  with  the  canal  route,  and  with  the  consent  of  the  Inter- 
state Commerce  Commission. 

I  still  hold  to  the  opinion,  as  expressed  in  a  statement  made  in 
February,  that  less  litigation  and  not  more  is  essential  for  a  continu- 
ance of  the  wonderful  development  of  our  merchant  marine  which 
'  is  now  in  process,  as  evidenced  by  the  unprecedented  number  of  ships 
now  under  construction  in  this  country  and  those  that  have  been 
transferred  to  our  flag. 

Why  apply  a  drastic  remedy  to  a  ])atient  whose  coudition  is  im- 
proving so  riii)idly  without  one?  Let  well  enough  alone.  Kemove 
the  menace  of  Government  interference  in  a  healthy  growing  busi- 
ness, except  so  far  as  unfair  practices  are  concei-ned.  Steamship 
business,  in  a  regular  service,  dealing  with  thousands  of  shipinn-s  and 
trying  to  please  them,  makes  a  greater  demand  upon  the  nerves  of 
the  managers  than  most  any  other,  and  to  have  to  s^rve  another 
master  and  be  subject  to  inquiry  and  espionage,  such  as  there  would 
be  under  Government  control,  woidd  make  it  irksome  to  continue 
business  under  such  conditions;  particularly  at  this  time,  when  the 
i-equirements  of  England  for  transportation  are  so  pressing  that 
there  is  a  great  indiicement  to  accept  the  fabulous  prices  that  are 
being  offered  for  the  purchase  of  ships. 


REGULATORY    FP:ATURES    OP    SHIPPING    BILL.  93 

The  CiiAiijMAx,  England  at  this  time  has  her  curb  on  her  shipping 
and  is  compelling  her  ships  to  carry  goods  at  much  lower  rates  than 
they  would  charge  if  they  had  a  free  hand;  is  not  that  true? 

Mr.  Dearborn.  I  did  not  understand  you. 

The  Chairman.  I  say  England  has  a  curb  on  her  shipping  now, 
and  is  compelling  them  to  carry  freight  at  a  much  less  rate  at  this 
time  than  they  would  if  they  had  a  free  hand. 

Mr.  Dearborn.  Under  war  conditions? 

The  Chairman.  Yes. 

Mr.  Dearborn.  I  say  that  is  a  war  measure. 

The  Chairman.  I  know  that  is  true.  So  that  there  are  conditions 
under  which  the  Government  must  interfere  to  prevent  unfair  treat- 
ment? 

Mr.  Dearborn.  Well,  I  suppose  the  proper  way  to  conduct  a  war 
is  to  put  everything  under  martial  law. 

The  Ciiair:man.  Your  remarks  were  addressed  particularly  to  the 
section  of  the  bill  relating  to  interstate  commerce? 

Mr.  Dearborn.  And  to  the  rate-regulating  power. 

The  Chairman.  You  do  not  think  any  governmental  body  should 
have  any  power  whatever  to  interfere,  if  a  transportation  company 
by  water  should  practice  extortion? 

Mr.  Dearborn.  No.  The  question  would  first  come,  I  think.  What 
is  the  definition  of  extortion? 

The  Chairman.  Well,  charging  several  times  more  than  a  service 
is  worth. 

Mr.  Dearborn.  What  is  the  service  worth?  Take  conditions  to- 
day. 

The  Chairman.  I  would  say,  under  ordinary  conditions,  you 
should  take  into  consideration  the  investment,  the  cost  of  the  Service, 
and  a  reasonable  return  in  the  way  of  profit. 

Mr.  Dearborn.  Therefore,  then,  your  pur})ose  in  this  bill  is  to  fix 
a  rate  based  upon  the  earning  poAver  of  the  ship? 

The  Chairman.  No;  under  this  bill  I  do  not  think  we  go  that  far. 
You  asked  me  what  I  considered  a  reasonable  rate.  Tl!is  bill  does 
not  undertake  to  go  that  far  at  all. 

Mr.  Dearborn.  If  I  were  a  member  of  this  board  to  be  a})pointed, 
and  received  my  power  from  this  committee,  I  would  naturally  ask 
the  chairman  of  the  committee  to  define  this  section  referi-ing  to  the 
rate-making  power — what  is  it  to  be  based  upon? 

The  Chairman.  I  think  you  would  take  the  language  of  the  hnv 
itself  and  give  it  a  reasonable  construction  in  the  light  of  conditions 
if  you  administered  the  law  intelligently. 

Mr.  Dearborn.  Yes;  but  there  is  a  condition  of  suppW  and  demand. 
My  point  is  that  dealing  with  steamships  is  no  different  from  dealing 
with  manufacturers. 

The  Chairman.  Your  opinion  is,  then,  if  one  man  had  control  of 
all  the  flour  and  bread  in  the  community  that  he  should  charge  any 
price  he  chose  for  it? 

Mr.  Dearborn.  Well,  I  can  not  draw^  upon  my  imagination  to  such 
an  extent  as  to  make  such  a  picture. 

The  Chairman.  But  that  is  the  effect  of  monopoly.  Under  the 
provisions  of  this  bill  we  recognize  agreements  and  that  there  are 
certain  combinations  that  may  be  fair  and  reasonable,  and  if  these 
lines — vour  line  and  other  lines — should  enter  into  a  fast  agreement 


94  REGULATORY    FEATURES    Of    SHIPPING    BILL. 

by  which  eoiiipetition  was  shut  out.  aiul  by  reason  of  the  elimination 
of  that  competition  you  shoukl  charge  just  what  you  })lease.  you 
tiiink  the  people  ought  to  stand  it.  do  you  ? 

Mr.  Deakborx.  1  think  you  are  theorizing.  ]\Ir.  ("hairman,  on  a 
wrong  situation. 

The  Chairman.  I  want  to  illustrate  a  principle.    Is  that  true? 

Mr.  Dearhorn.  I  agree  Avith  you  that  if  it  was  possible  for  any 
man  or  group  of  men  to  control  any  industry  in  this  coimtry  and  fix 
the  price.  I  should  certainly  think  the  Government  ought  to  step  in. 

The  Chairman.  Sui-ely.  I  do  not  think  there  is  any  disagreement 
on  that. 

Mr.  Dearrorn.  Xo,  never.  Except  in  transportation  on  railroads, 
I  have  never  heard  of  such  a  situation  existing. 

The  Chairman.  Not  to  the  same  extent,  maybe ;  but  what  I  wanted 
to  get  from  3^ou,  Mr.  Dearborn,  is  Avhether  or  not  you  indorse,  as  a 
principle,  if  the  conditions  existed  by  which  the  tonnage  is  abso- 
lutely controlled  by  a  combination,  that  this  ship})ing  board  should 
have  no  power  to  relieve  the  public  from  extortion  i 

Mr.  Dearrorn.  You  are  dealing  with  two  situations.  You  are 
dealing  with  a  trade  where  these  methods  have  been  adopted  of  doing 
business  under  conferences  and  combinations ;  and  practically  in  this 
bill  you  have  given  immunity  from  the  Sherman  Act. 

The  Chairman.  If  it  is  reasonable,  yes.  Does  that  meet  with  your 
approval  ? 

Mr.  Dearborn.  I  should  say  it  would  seem  logical  from  the  stand- 
point of  this  committee,  in  consideration  of  this  privilege,  to  have 
some  control  of  the  rates. 

The  Chairman.  Yes. 

Mr.  Dearborn,  But  take  from  the  hands  of  those  on  the  board  the 
pur]iose  to  apply  this  regulating  powder,  not  only  to  those  w^ho  are 
working  to-day  in  defiance  of  the  Sherman  Act  but  those  w^ho  have 
no  such  methods  of  business,  who  are  foot  free,  as  our  company  is, 
wdio  would  then  be  i)laced  under  this  embargo  with  no  compensation. 
That  is  where  Ave  differentiate  between  the  two  methods  of  doing 
business. 

The  Chairman,  There  are  always  men  who  are  fair  in  business  and 
the  law  is  not  aimed  at  them.  Just  like  our  criminal  law  is  not 
aimed  against  the  law-abiding  citizen,  but  against  the  other  felloAv. 
Now,  I  assume  that  the  American-Hawaiian  Steamship  Co.  belongs 
to  the  class  that  is  free  from  these  conditions — that  is,  in  its  business 
methods,  has  not  provoked  this  class  of  legislation. 

Mr.  Dearborn,  Yes. 

The  CiiAiRiMAN.  But  oui-  investigation  of  the  Shipping  Trust  dis- 
closed conditions  out  of  Avhich  these  suggestions  have  been  developed. 

Mr.  Dearborn.  As  a  felloAv  says,  "We  are  almost  too  good  to  be 
true." 

The  Chairman.  No. 

Mr.  Dearborn.  I  mean  to  say  that  it  has  not  been  necessary  for  us. 
We  have  gone  about  our  business,  that  is  all. 

The  Chairman.  We  investigated  you  along  with  the  other  people, 
and  we  practicall}^  ga.ve  you  a  clean  bill  of  health,  so  far  as  that  is 
concerned.  In  the  coastAvise  trade  you  say  you  do  not  think  it  is 
practical  to  vest  in  the  Interstate  Commerce  Commission,  or  in  this 
board,  the  poAver  to  supervise  rates?  The  Interstate  Commerce  Toni- 
missiori  does  do  it  noAv.  Avhere  there  is  a  joint  rate,  and  I  noticed  the 


BEGULATORY    FEATURES    OF    SHIPPING    BILL.  95 

other  day  that  the  Ocean  Steamship  Co.  had  proposed  to  increase  the 
rates  about  15  per  cent  and  the  Interstate  Commerce  Commission 
Avoiild  not  permit  it. 

Mr.  Dearborn.  That  is  in  connection  with  arrangements  with 
other  raih'oads  when  they  make  through  rates. 

The  Chairman.  Yes. 

Mr.  Dearborn,  Of  course,  that  is  quite  different  from  making 
rates  from  port  to  port. 

The  Chairman.  Why  should  it  be? 

Mr.  Dearborn.  That  is  done  because  the  interstate  LaAv  clearly 
states  that,  that  steamship  companies  having  arrangements  with 
railroads  and  participating  or  having  a  division  of  rates  are  under 
the  law\ 

The  Chairman.  That  is  true;  it  is  under  the  law. 

Mr.  Dearborn.  Yes. 

The  Chairman.  But  why  should  not  steamship  companies  and 
regular  lines  in  the  port  to  port  business  come  under  the  law,  too? 

Mr.  Dearborn.  I  will  ask  you  a  question 

The  Chairman.  I  am  asking  for  information. 

Mr.  Dearborn  (continuing).  How  are  you  going  to  define  a  reason- 
able rate?  Take  in  our  own  case;  we  have  a  fleet  of  26  steamers,  and 
our  last  ship  came  out  about  two  weeks  ago.  The  average  cost  of  our 
ships  is  probably  $60  a  ton  less  than  the  highest  price  paid — oh,  more 
than  that — $100  a  ton.  Suppose  you  are  going  to  fix  a  reasonable 
rate.  We  are  already  in  the  business.  Another  concern  is  going  into 
the  business  and  has  paid  those  high  prices  for  ships.  Is  that  rate 
to  be  fixed  upon  the  highest  cost  of  ships  in  the  service?  If  so,  then 
our  rate,  if  it  is  fixed  on  that  basis,  would  be  unreasonably  high; 
and  if  it  was  fixed  upon  our  cost,  the  other  fellow  could  not  com- 
pete with  us.  If  it  was  fixed  one  rate  based  upon  the  cost  of  one 
ship  and  another  rate  based  upon  the  cost  of  another  ship,  the  rates 
would  be  different  in  both  services.  When  you  touch  upon  this  rate 
regulating  power  I  do  not  believe  for  a  moment  you  mean  to  fix 
your  rate  of  freight  upon  that  basis ;  but,  nevertheless,  you  are  giving 
this  board  a  power  to  fix  a  reasonable  rate — a  maximum  rate. 

The  'Chairman.  When  Ave  investigated  the  so-called  Shipping 
Trust  the  regular  lines  and  the  coastwise  services  on  the  Atlantic 
and  Pacific  filed  with  us  what  they  said  were  their  schedules  of  rates. 
How  did  they  fix  them  ? 

Mr.  Dearborn.  I  will  tell  you.  There  are  certain  services  that  are 
not  subject  to  competition.  I  mean  to  say  you  take  these  Atlantic 
coast  lines,  lines  running  between  (Charleston,  New  York,  and  Savan- 
nah; they  have  regular  service,  have  their  terminals,  their  regular 
freight,  and  they  do  not  have  competition.  In  another  trade,  such 
as  ours,  between  New  York  and  San  Francisco,  where  the  volume  is 
very  large,  we  have  all  kinds  of  competition.  Now,  you  take  a  tramp 
steamer — I  understand  it  is  not  your  purpose  to  apply  this  regula- 
tion to  tramp  steamers  ? 

The  Chairman.  We  are  not  going  to  say  that  she  can  not  charge 
a  low  rate.  They  would  be  amenable  to  the  law  if  they  charged  an 
unreasonably  high  rate,  I  suppose,  and  complaint  were  made. 

Mr.  Dearborn.  Well,  a  tramp  steamer  is  hardly  likely  to  charge 
li  higher  rate,  because  they  are  in  a  position  to  make  very  much  low^er 
rates. 


96  KEGUI.ATORV    FKATUKKS    OK    SHIPPING    BILL. 

The  Chaihman.  You  have  a  reguhir  line  service  from  the  Athiiitic 
coast  to  the  Pacific  coast,  liave  you  not? 

Mr.  Dearboijx.  Oh,  yes. 

The  Chairman.  Is  there  any  greater  reason  why  those  lines  from 
New  York  to  Savannah  and  XeAV  York  to  Xew  Orleans  and  Xew 
York  to  (ialveston  should  be  regulated  than  that  your  line  in  the 
intercoastal  trade  should  be  supervised  and  regulated? 

Mr.  Dkarhorn.  That  is  my  point  exactly,  Judge.  Conditions  are 
so  diiferent  in  different  trades  that  you  can  not  standardize  a  method 
of  treatment  for  all  trades,  and  if  you  can  not  standardize  them  1 
do  not  see  how  j^ou  are  going  to  do  it. 

The  Chairman.  Take  the  lines  on  the  Pacific  coast,  take  the  line 
from  Seattle  to  Los  Angeles,  and  from  Seattle  to  San  Francisco, 
is  there  any  reason  Avhy  different  rules  should  be  applied  to  them 
than  to  those  Atlantic  coast  line  services  i' 

Mr.  Dearp.orn.  No:  I  think  they  are  in  the  same  category.  I  do 
not  think  the  lines  running  between  Savannah,  New  York,  and 
Charleston  would  care  a  bit  about  working  under  the  interstate  law 
to-day.  practically,  because  they  are  making  rates  to  interior  points 
through  arrangements  with  the  railroads,  and  their  volume  of  busi- 
ness is  limited.  I  mean  to  say  that  they  carry  a  general  cargo,  mis- 
cellaneous freight  and  freight  that  a  tramp  could  not  get  because 
a  tramp  could  not  give  the  service,  whereas  in  our  business  there  is 
a  great  volume  of  business,  and  a  great  deal  of  it  would  comprise  the 
coarse  freight  and  round  lots  of  carload  freight.  AYe  are  dealing  in 
our  business  in  normal  times,  eastbound  and  westbound,  with  prob- 
ably 3,000,000  tons  of  freight.  Now,  there  is  no  such  volume  of 
business  in  the  coast  trade.  If  there  is,  why,  they  would  charter  an 
outside  steamer.  I  mean  to  say,  if  there  was  a  cargo  of  phosphate 
to  come  np  here  from  the  Gulf  of  Mexico  or  from  Tampa  that  is 
done  in  full  cargoes.  The  regular  lines  do  not  attempt  to  deal  with 
that  class  of  freight. 

So,  if  I  were  before  your  committee  to-da}^  and  this  bill  had  been 
passed  and  the  law  was  in  effect,  and  we  w^anted  to  develop  our 
business,  or  if  I  were  a  new  man  in  the  business  and  wanted  to  de- 
velop— Ave  were  nnder  regulation  and  we  had  never  been  under  regu- 
lation before — I  would  say,  '*  Please  tell  us  what  is  the  limit  of  profit 
we  can  make  in  our  l)usiness?  Please  tell  us  what  your  rate  regula- 
ti(m  means?    What  is  the  definition  of  a  maximum  rate?  " 

The  CHAiR:NrAN.  Do  you  not  think,  having  a  monopoly  of  the 
coastwise  trade,  that  it  would  be  a  reasonable  exercise  of  the  i)ower 
of  the  (lovernment  to  say  that? 

Mr.  Dearborn.  That  is  where  it  comes  again.  I  think  you  might 
do  that  where  conditions  are  uniform  and  permanent.  That  would 
happen  in  the  trade,  for  instance,  between  New  York  and  Charleston 
and  Savannah.  I  do  not  think  the  factors  in  that  business  have 
changed  in  years.    With  our  business  it  is  absolutely  different. 

The  Chairman.  'Jliis  bill  is  elastic  enough  for  the  shipping  board 
to  recognize  those  differences,  is  it  not? 

Mr.  Dearborn.  Yes.  I  discussed  this  matter  once  about  four 
years  ago  with  the  Committee  on  Interstate  Commerce,  on  the  canal 
rate  tolls.    I  went  to  some  length 

The  Chairman.  I  i-ead  youi-  statement  then  with  a  gi-eat  deal  of 
interest  myself. 


REGULATORY    FP]ATURES    OF    SHIPPING    BILL.  97 

Mr.  Dearborn.  You  remember  it,  then? 

The  Chairman.  Yes. 

Mr.  Dearborn,  I  do  not  see  how  it  is  workable.  I  do  not  see 
how.it  is  with  the  types  of  ships  and  the  differences  in  cargoes  you 
are  dealing  with.  It  is  a  strange  thing.  You  take  a  regular  service — 
take  our  service:  We  have  20.000  or  30,000  ton  ships;  we  are  getting 
a  class  of  cargo  that  tramp  steamers  could  not  get  because  they 
could  not  give  the  same  service.  And  here  our  terminals  enter  into 
the  total  cost  of  our  plant,  or  about  25  per  cent  of  the  cost  of  our 
ships. 

The  Chairman.  Do  you  own  your  terminals  in  New  York? 

Mr.  Dearborn.  No;  we  lease  the  terminals.  We  pay  Mr.  Bush — 
it  is  considered  the  biggest  pier  in  the  world — $165,000  a  year.  We 
have  capitalized  that  really  on  the  value  of  three  millions  or  three 
and  a  half  millions.  I  think  probablv  the  cost  of  our  terminals  go 
up  nearer  G.OOO.pOO  than  3.000.000.  "l  can  not  see  how  we  would 
work  if  this  law  should  apply  to  us.  We  must  go  to  the  board  and 
get  the  privilege  of  changing  our  rates.  We  often  have  ships,  for 
instance,  leaving  the  Pacific  coast,  on  which  we  engage  freight.  It 
is  all  one-sided  between  the  ship  and  the  shipper;  the  ship  is  always 
obligated  to  take  the  freight,  but  the  shipper  is  never  obligated  to 
ship  it.  Now,  that  is  a  matter  of  experience.  I  mean  to  say,  in  the 
busy  season  when  California  products  are  moving  this  way,  they  come 
in  and  book,  and  say,  "  Here,  we  will  book  this  freight,  about  50 
per  cent  of  the  space,  but  we  Avill  book  all  of  it."  Now,  they  fall 
down,  and  a  ship  is  going  out  with  500  tons  of  space ;  they  fall  down 
on  the  freight,  and  we  ha"\'e  no  recourse  on  the  shipper.  A  ship  at 
all  times  in  the  regular  service  in  the  country  must  please  its  ship- 
pers: it  must  have  the  good  will  of  the  shipper:  it  must  give  him 
privileges  that  he  is  not  entitled  to. 

The  Chairman.  You  are  speaking  now  of  the  regular-line  service? 

Mr.  Dearborn.  The  regular  line. 

The  Chairman.  And  that  would  apply  to  your  service? 

Mr.  Dearborn.  That  would  apply  to  our  service,  if  we  wanted  some 
freight  in  a  hurry. 

The  Chairman.  You  call  the  other  ships  that  are  in  the  irregular 
service — they  are  not  exactly  tramp  ships,  but  their  conditions  are 
different  from  the  regular-line  service.  Do  you  have  regular-line 
service  to  Hawaii  ? 

]Mr.  Dearborn.  No.  We  have  a  service  from  Puget  Sound  to 
Hawaii,  and  then  we  take  our  westbound  cargo  from  New  York  down 
mere,  and  then  also  local  freight  from  Puget  Sound,  and  then  we 
come  back  with  sugar. 

The  Chairman.  Do  you  have  regular  sailings? 

Mr.  Dearborn.  Oh,  yes.  We  have  in  our  service  sailings  about 
every  10  days  for  the  islands,  a  regTilar  sailing.  I  brought  up  there 
tlie  rate-making  power,  as  dealing  with  this  contract  we  have  with 
the  sugar  factories  in  Hawaii.  They  come  to  us  and  say,  "We  have 
so  many  .sugars  to  move.  We  w^ant  you  to  move  all  those  sugars. 
We  want  you  to  agree  to  do  this;  we  don't  agree  to  ship  by  you  any 
sugars  except  those  we  are  going  to  send  .to  the  Pacific  coast,  and  we 
can  not  tell  how  many  we  are  going  to  send."  That  is  a  one-sided 
contract. 

38.5.34—16 7 


98  REGUl.ATORV    FKATUHES    OF    SHIPPING    BILL. 

The  C'liAiHMAN.  Do  you  think  ii'  this  were  a  hiw  it  would  inter- 
fere with  your  contract  with  the  sugar  phmters^ 

Mr.  Deakbokx.  That  is  what  I  want  to  know. 

The  CiiAiHMAX.  You  have  read  the  bill,  have  you  not? 

Mr.  Dearborn.  Yes;  I  have  read  the  bill,  but  j'ou  have  the  rate- 
making  power.  What  is  it?  I  am  still  asking  the  <]uestion.  I  have 
heard  discussions  here  this  forenoon  in  respect  to  the  present  high 
rates  of  freight,  and  (lod  knows  they  are  exorbitant  and  fabulous. 
Is  this  rate-making  power  to  be  api)lied,  for  instance,  to  this  situa- 
ti(m,  or  is  it  to  be  applied  to  any  other  situation? 

The  Chairman.  I  Avould  say  this,  that  under  the  provisions  of 
this  bill,  this  board  has  the  ])()wer  to  consider  conditions  and  deter- 
mine whether  or  not  the  conditions  are  extraordinary,  and  if  they  are, 
they  will  have  the  power  to  recognize  that  fact  and  not  impose  any 
unreasonable  restrictions. 

Mr.  Dearborn.  But  then  they  must  have  some  idea  in  their  minds 
as  to  what  a  seasonable  rate  would  be. 

The  Chairman.  How  did  the  Interstate  Commerce  Commission, 
in  this  case  to  which  I  referred,  ascertain  that  the  proposed  increase 
of  15  per  cent  was  unreasonable  as  applied  to  the  Ocean  steam- 
ship Co.? 

Mr.  Dearborn.  Take  the  Interstate  Commerce  Commission.  The 
Interstate  Commerce  Connnission  is  trying  to  find  a  basis  now  upon 
which  to  make  rates,  is  it  not?  They  are  going  through  a  process 
of  valuing  the  railroads.  Ultimately  they  expect  to  make  a  rate 
based  upon  the  return  on  the  investment,  or  a  return,  I  will  say,  upon 
the  value  of  their  property.  As  it  is  to-day  the  Interstate  Commerce 
Commission  will  make  rates,  I  suppose,  based  upon  the  dividends  as 
evidencing  the  prosi)erity  of  the  railroad  they  are  dealing  with.  Of 
course,  one  railroad  is  prosjierous  and  another  is  not  prosperous, 
and  the  same  rate  applies  to  both. 

The  ]ioint  I  want  to  make  as  fundamental  in  this  thing,  is  whether 
3'OU  are  dealing  with  companies  operating  a  fleet  or  dealing  w^ith  a 
few  ships  or  one  ship,  the  unit  is  a  ship ;  you  are  putting  the  ship  in 
the  same  category  as  the  railroad.  .Now,  you  have  trade  commis- 
si! ns.  \  ()U  have  Sherman  Act  to  govern  unfair  ]))'actices  in  general 
business  and  manufacturing.  A  ship  is  nothing  but  a  manufactur- 
ing plant,  but  it  gets  nothing  from  the  State.  AVhat  do  they  get, 
except  when  you  give  them  the  privilege  of  foi-ming  conferences? 
You  do  gi\e  them  something  there;  I  will  adn)it  that. 

Mr.  Hardy.  Right  at  that  point,  I  want  to  know^  if  the  board  can 
not  fix  reasonable  rates;  how  do  you  think  the  conference  lines  do 
it?    Do  you  form  a  conference  and  agree  on  rates? 

Mr.  Dearborn.  That  is  the  point  I  have  been  making.  I  say  you 
have  to  differentiate  the  rates.  There  are  companies,  steamship  com- 
panies, doing  business  under  conference  agreements. 

Mr.  Hardy.  With  the  rates  agreed  upon? 

Mr.  Dearborn.  Yes;  with  the  rates  agreed  u])on. 

Mr.  Hardy.  And  divisions  agi'eed  upon? 

Mr.  Dearborn.  Yes;  and  divisions  agreed  upon. 

Mr.  Hardy.  But  just  a  moment  ago,  I  understood  you  to  say  that 
this  board,  neither  for  the  individual  ships,  nor  for  the  lines — it 
doesn't  make  any  difference  whether  they  weie  tramps  or  lines  oper- 


REGULATORY   FEATURES   OF    SHIPPING   BILL.  99 

ating  together — that  the  ship  was  a  unit  and  that  the  board  could 
not  fix  any  rates. 

Mr.  Dearborn.  Before  you  came  in  I  said,  of  course,  I  would  dif- 
ferentiate between  steamship  companies  doing  business  under  those 
methods,  and  steamship  companies — which  are  the  great  majority — 
which  are  foot  free. 

Mr.  Hardy.  If  I  get  at  your  proposition — I  think  maybe  I  do — 
3'ou  think  this  board  could  regulate  the  rates  for  conference  lines  or 
regular  lines,  but  could  not  regulate  for  the  tramps? 

Mr.  Dearborn.  Yes;  on  those  now  doing  business  under  confer- 
ence arrangements. 

Mr.  Hardy.  Do  you  think  this  board  should  regulate  the  rates  for 
regular  lines? 

Mr.  Dearborn.  In  theory.  I  have  said  to  my  confreres  on  this 
committee,  that  I  do  not  belieAe  in  this  rate  regulating  power,  and 
w^hy?  As  I  say,  the  ship  as  such,  gets  nothing  from  the  State,  but 
if  ship  companies  doing  business  under  a  conference  get  immunity 
from  the  Sherman  act,  then,  they  are  getting  something  from  the 
State. 

Mr.  Hardy.  I  want  to  go  back,  then,  and  pin  something  down. 

Mr.  Dearborn.  Yes. 

Mr.  Hardy.  As  I  understood  you,  you  admit  that  the  lines  that 
have  regular  sailings  and  regular  routings  might  be  regulated  ? 

Mr.  Dearborn.  Yes;  if  you  think  it  is  necessary  to  do  business 
that  way,  3^ou  are  giving  them  a  privilege,  and,  I  think,  fundament- 
ally they  are  getting  something  from  the  State. 

Mr.  Hardy.  You  admit — just  as  a  conference  would  agree  upon 
the  rates — then,  this  board  could  fix  rates  w^ith  such  as  much  reason- 
ableness as  conference  lines  can  agree  upon  rates? 

Mr.  Dearborn.  Yes ;  except  that  it  would  be  very  difficult. 

Mr.  Hardy.  ^Vliat  would  be  difficult? 

Mr.  Dearborn.  It  would  be  very  difficult  to  fix  a  rate. 

Mr.  Hardy.  How  do  the  conference  lines  fix  them?  They  fix 
them,  do  they  not? 

Mr.  Deai{born.  Of  course,  going  back  to  normal  conditions,  these 
ccnfereiice  lines,  I  believe,  Avere  formed  not  for  aggrandizement, 
not  to  extort  money  from  the  public  at  abnormal  profits,  but  for  self- 
preservation. 

Mr.  Hardy.  That  is  perfectly  natural.  I  do  not  blame  men  for 
getting  together. 

Mr.  Dearborn.  Yes;  but  going  back  to  the  purpose  of  these  con- 
ference lines.  I  don't  think,  before  the  war  started  and  these  abnormal 
rates  existed,  that  there  would  be  any  complaints  from  shippers  about 
the  rates  themselves.  There  might  be  complaints  about  practices.  Of 
coui'se,  the  company  I  represent  has  never  been  in  that  kind  of  busi- 
ness, has  not  lieen  in  any  conference,  and  never  expects  to  be. 

Mr.  Hardy.  Then  I  imderstand  your  chief  objection  to  this  is  that 
you  can  not  apply  this  to  the  tramp  steamer? 

Mr.  Dearborn.  To  what? 

Mr.  Hardy.  To  the  tramp  steamer. 

Mr.  Dearborn.  No.  I  am  taking  our  own  case.  I  do  not  think 
our  steamers — ^we  have  "26  performing  this  service;  we  are  not 
tramps. 

Mr.  Hardy.  Have  you  any  regular  lines? 


100  KEGUl.ATORY    l^EATURES    OF    SHIPPING    KII.I.. 

Mr.  Dearborn.  Oh.  we  have  a  legular  service. 

Mr.  Hardy.  As  I  umlei-stand  you.  are  y<ai  nc  t  in  any  of  these  con- 
ference ao'reements  ? 

Mi-.  DEARmniN.  No. 

Mv.  Hardy.  AA'lis'.t  has  become  of  all  the  ships  that  are  in  the  con- 
ference agreements  ? 

Mr.  Deari'.orn.  My  dear  sir.  our  service  was  in  the  coastwise  trade. 
We  have  a  lot  of  competition. 

Mr.  Hardy.  You  don't  mean  to  say  that  you  ha\e  not  any  con- 
ference agreements  in  the  coastwise  trade? 

Mr.  Dearkohx.  Not  in  oui"  trade. 

Mr.  Hardy.  AVhat  sort  of  trade  is  yours? 

Mr.  Dearrorn.  Our  ti-ade  is  trade  in  which  we  oi>erated  shijjs  be- 
tween the  Atlantic  coast  ports  and  the  Pacific  coast  ports,  and  to 
Hawaii  and  back  to  New  York.  AVe  used  to  operate  through  JSIagel- 
lan.  Originally  we  operated  sailing  ships  around  Cape  Horn.  AVe 
have  developed  a  fleet  of  twenty-six  10,000-ton  steamers,  and  it  all 
came  from  the  time  that  the  navigation  laws  were  applied  to  Hawaii. 
AAHien  Hawaii  Avas  taken  over  in  1898  the  navigation  hnvs  were 
apjjlied  to  Hawaii,  and  we  staited  in.  AA^e  said,  "Here  is  our  oppor- 
tunitv  to  get  return  rargo.*'  In  those  times  we  could  get  cargo  to  the 
Pacific  coast,  but  Ave  could  not  get  it  back. 

Mr.  Saunders.  You  say  the  ship  does  not  get  anything  from  the 
'State.  It  seems  to  me  in  that  very  instance  you  have  given  of  the 
apidication  of  the  navigation  laA\s  to  Hawaii,  which  enabled  you  to 
build  ui)  this  trade,  that  you  got  something  from  the  State. 

jNIi-.  Dkarhorn.  Surely:  but  any  other  ship  has  the  same  right. 

Mv.  Saunders.  Any  other  railroad  could  get  the  same  charter  as  a 
particular  road. 

Mr.  Dearborn.  No;  rights  that  the  railroad  has  can  not  be  taken 
away  from  it  by  any  other.  I  say  the  ocean  is  free.  AA^'e  have  no 
trackage  rights. 

Mr.  Saunders.  No;  not  in  this  particular  trade. 

Mr.  Dearborn.  It  is  free  to  ships. 

Mr.  Saunders.  It  is  not  free  in  the  trade  you  operate;  it  is  free  to 
American  ships,  but  it  is  not  free  to  foreign  ships. 

Mr  Dearborn.  It  is  free  to  American  ships.  AA^e  have  no  mo- 
nopoly. A  railroad  has  a  monopoly  of  the  territory  through  which 
it  goes. 

Mr.  Saunders.  Not  necessarily;  they  can  build  a  parallel  railroad. 

Mr.  Dearborn.  I  knoAV,  but  not  in  the  immediate  territory.  A 
ship  does  not  control  anything. 

Mr.  Saunders.  Of  course,  the  railroad  controls  the  immediate 
track  it  runs  on,  but  it  is  not  such  a  great  thing.  You  say  it  gets 
some  benefit  from  the  Commonwealth  or  the  State  that  the  ships  do 
not  get.  You  illustrated  the  naA'igation  laws  that  enabled  you  to 
buiki  up  this  great  business.  I  have  observed  several  times  that  the 
question  has  been  asked,  as  if  it  was  an  unsolvable  one.  How  can  we 
define  a  reasonable  rate? 

Mr.  Dearborn.  Yes. 

Mr.  Saundeijs.  In  everyday  business  in  this  country  we  are  con- 
fronted with  the  same  sort  of  thing,  to  define  reasonable  care.  A 
man  is  required  to  exercise  reasonable  care.  How  would  you  define 
reasonable  care?    Have  you  ever  served  on  a  jury? 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  101 

Mr.  Deakroijx.  There  would  be  a  deg-ree  of  care,  whether  it  was 
goino;  to  preserve  a  human  life  or  do  better  than  that. 

Mr.  Saunders.  Xo;  but  the  courts  require  you  to  exercise,  under 
certain  conditions,  reasonable  care.  If  you  ever  served  on  a  criminal 
jury  you  would  be  instructed  with  regard  to  reasonable  doubt.  How 
would  you  define  reasonable  doubt.  It  has  been  tried  several  times, 
l>ut  nobody  has  ever  gotten  any  further  than  a  reasonable  doubt  is  a 
reasonable  doubt. 

Mr.  Dearborn.  I  say  in  a  case  of  that  kind  it  all  depends  upon  the 
evidence. 

Mr.  Saunders.  What  is  a  reasonable  doubt? 

Mr.  Dearborn.  You  have  the  evidence  pro  and  con,  but  in  the  case 
of  fixing  a  rate,  there  it  is  not  necessary  to  get  anything  reasonable — 
that  is,  to  fix  a  rate.    And  what  is  it  based  on? 

Mr.  Saunders.  I  would  have  replied  just  as  3'ou  have  replied  with 
respect  to  a  reasonable  doubt;  it  would  depend  upon  the  evidence, 
and  the  evidence  in  that  case  would  depend  upon  the  facts,  and  the 
facts  would  be  the  factors  in  this  business  in  respect  to  which  the 
rate  is  charged. 

Mr.  Dearborn.  If  j^ou  were  chairman  of  that  board  you  would 
say.  "What  is  the  property  cost;  what  is  a  reasonable  cost;  what  is 
the  return  on  the  investment  ?  " 

Mr.  Saunders.  I  was  just  going  to  follow  that  up. 

Mr.  Dearborn.  Yes. 

Mr.  Saunders.  You  can  all  tell  in  the  ship  business  whether  you 
are  making  money  or  losing  it? 

Mr.  Dearborn.  Take  a  ship  in  normal  times 

Mr.  Saunders.  Take  normal  or  abnormal  times.  Can  not  you  all 
tell  whether  you  are  making  money? 

Mr.  Dearborn.  Let  us  deal  with  the  situation  to-day.  Those  who 
are  building  ships  to-day  and  those  who  have  bought  ships  at  the 
high  pi'ices — as  high  as  $180  a  ton  has  been  paid  for  ships 

Mr.  Saunders.  Yes. 

Mr.  Dearborn.  And  there  are  ships  in  the  service  that  have  cost  as 
low  as  $40  a  ton.  Xow,  if  you  ai'e  going  to  fix  a  rate  for  the  service 
based  upon  the  highest  cost  ship,  it  would  be  an  unreasonable  rate  for 
the  loAvest  cost  ship. 

Mr.  Saunders.  In  that  condition  the  element  of  prime  cost  would 
be  a  pioper  element  to  consider,  but  can  you  not,  as  a  company,  in 
operating  ships,  determine  whether  you  are  making  money  or  losing 
money  ? 

Mr.  Dearborn.  In  operating  our  ships  we  charge  off  5  per  cent  for 
depreciation.  Now,  you  get  down  to  a  basis.  Suppose  it  Avas  put  up 
to  you  as  chairman  of  this  board,  and  we  show  10  per  cent  after 
charging  off  for  depreciation,  would  you  say  that  was  an  excessive 
rate  ? 

Mr.  Saunders.  Whether  that  particular  thing  is  a  reasonable  or 
unreasonable  rate  would  depend  upon  the  facts  in  that  case. 

Mr.  Dearborn.  Yes. 

Mr.  Saunders.  I  am  coming  up  to  that.  I  ask  you  the  same  ques- 
tion: Can  you  not,  in  your  business,  determine  whether  you  are 
making  or  losing  money  ? 


102  REGULATORY   FEATURES   OF    SHIPPING   BILL. 

Mr.  Deahboun,  Thore  have  been  times  in  the  husiness  when  it  was 
merely  a  case  of  whether  you  took  m  more  money  than  you  paid  out. 
You  didn't  ha\e  enough  to  go  into  it. 

Mr.  Saunders.  AVith  reference  to  the  sahiries  you  are  paying  or 
dividends  you  are  paying — a  man  can  tell  whether  he  is  prosperous 
or  not. 

Mr.  Dkakijohn.  A\'hy.  certainly. 

INIr.  Sauxdkks.  Of  course  your  answer  to  that  must  be  yes. 

Mr.  Dearhokn.  '^'es:  a  man  knows  whether  he  has  got  a  dollar  in 
his  pocket  or  not. 

Mr.  Saunders.  A  man  can  tell  whether  he  is  prospering  greatly, 
as  compared  with  his  condition  of  whether  he  is  paying  big  dividends 
or  little  dividends. 

jNIr.  Dearborn,  ^'es:  certainly. 

Mr.  Sainders.  Now.  when  you  ha\e  all  these  factors  it  seems  to 
me  it  would  be  \ery  easy  to  determine  whethei-  any  particular  rate 
furnished  great  i)ros|)ei'ity  or  modeiate  prosi>erity  or  just  sufficient 
to  keep  things  going.  When  you  all  know  those  things  I  do  not 
think  any  man  in  this  room  would  ha\e  any  difficulty  to  determine 
whether  it  was  a  reasonable  oi'  unreasonable  profit. 

Mr.  Dearborn.  Sui)pose  in  our  case  we  have  a  fleet  of  ships  that 
v.ere  built  recently  and  some  other  fellow  comes  along  with  a  fleet 
of  shi})s.  a  dozen  ships,  that  were  built  some  time  ago,  and  he  was 
satisfied  with  a  mai-gin  of  profit  that  would  luin  us.  You  are  not 
going  to  deprive  the  [)ublic  of  those  more  economical  ships  ^ 

Mr.  Saundeiss,  Not  a  bit  in  the  world.     How^  does  that  hit  you? 

Mr.  Dearborn.  That  hits  me,  because  we  are  down  and  out. 

Mr.  Saunders.  That  is  under  the  law  of  ethics  of  competition. 

Mr.  DEARBOitN.  Suppose  we  had  a  dozen  ships  (I  will  reverse  it). 
Our  ships  were  built  some  years  ago.  and  I  think  now  the  axerage 
cost  of  those  ships  would  be  perhaps  $100  a  ton  less  tlian  the  highest 
price  paid  for  shi])S  recently,  but,  say,  $?j5  a  ton  less  than  they  are 
paying  foi-  ships  for  delivery  two  years  hence.  Now,  some  man  is 
l)uilding  ships  perhaps  for  our  trade.  We  do  not  know.  They  are 
building  a  lot  of  American  ships.  If  you  fix  a  rate  of  freight  based 
upon  this  cost — my  Lord,  we  are  going  to 

Mr.  Saunders.  But  that  does  not  create  any  difficulty.  If  I  follow 
the  thought  you  are  suggesting,  it  is  that,  by  reason  of  the  fact  that 
you  built  your  ships  cheaper,  you  would  be  able  at  the  same  time  and 
at  the  same  rate  to  i)ay  nuu;h  bigger  di\i(lends. 

INIr.  Dearborn.  No;  if  we  were  satisfied  with  a  lower  margin  of 
profit,  we  AYOuld  cut  the  other  fellow  and  drive  him  out  of  business. 

]\Ir.  Saunders.  Very  well ;  do  you  think  you  ought  to  be  alloAved  to 
do  that,  just  simply  to  uiulercut  for  the  ])urpose  of  driving  somebody 
else  out  of  business^ 

Mv.  Dearborn.  If  we  are  willing  to  do  business  at  a  low  margin  of 
jjrofit,  I  should  think  we  should  be  able  to  take  the  benefit  of  it. 

The  Chairman.  That  would  be  all  right  if,  after  ycui  ha\e  driven 
the  other  fellow  out.  you  did  not  raise  the  rates. 

Mr.  Saunders.  That  was  to  be  my  next  (juestion.  Do  you  bclievo 
in  that  case  those  possibilities  ought  to  be  allowed  ^ 

Mr.  Dearborn.  I  am  trying  to  point  out  the  difficulties  you  are 
trying  to  deal  with.  I  really  think  it  is  uuw(U'kable.  and  it  could 
not  be  made  equitable. 


REGULATORY    FKATURES    OF    SHIPPING    BILL.  103 

Mr.  Saunders.  Suppose,  to  follow  out  your  suggestion — you  say  it 
is  unworkable;  I  do  not  see  any  great  difficulty  so  far. 

Mr.  Dearborn.  Then  my  words  have  had  no  effect  upon  you  what- 
ever- 
Mr,  Saunders.  No;  I  do  not  put  it  that  way  at  all,  but  1  say  the 
illustration  you  have  given  is  certainly  solvable,  so  far  as  you  ha\e 
gone,  because  you  have  admitted  you  can  tell  whether  you  are  making 
big  profits,  reasonable  profits,  or  little  profits.  I  am  taking  that  very 
suggestion  and  taking  that  ship  line  you  say  was  l)uilt  a  few  years 
!igo.  that  was  built  cheaply,  and  you  are  able,  by  reason  of  those 
conditions,  to  make  100  per  cent,  whereas  a  fellow  who  is  going  into 
the  business  now,  with  reference  to  the  increased  cost  of  his  construc- 
tion, operation,  etc.,  could  not  make  more  than  10  per  cent.  Do  you 
think  3^ou  ought  to  be  allowed  to  go  on  and  make  100  per  cent  and 
tell  me  there  is  not  enough  authority  and  ability  in  the  business  world 
to  deal  with  a  situation  like  that  and  say  to  you  "  (Jentlemen.  100  i)er 
cent  under  these  conditions  is  unreasonable  and  extravagant,  and  the 
mere  fact  that  you  are  able  to  do  it  does  not  justify  the  rashness  and 
impropriety  of  it." 

Mr.  Dearborn.  In  the  underlying  principles  applied  to  an}'  busi- 
ness, every  man  knows  no  man  can  enjoy  100  per  cent  profit  in  his 
business  for  any  length  of  time. 

Mr.  Saunders.  Don't  take  that  illustration :  make  it  r>0. 

Mr.  Dearborn.  I  say  make  a  normal  profit.  We  have  to  do  busi- 
ness on  a  normal  profit,  and  then  a  great  deal  depends  on  the  capi- 
talization. You  take  a  company  that  is  capitalized  conservatively; 
that  is,  they  have  put  their  surplus  earnings  into  new  ships,  and  they 
have  allowed  their  companies  to  develop  from  surplus  earnings;  they 
have  not  issued  stock.  Just  think  with  how  much  smaller  a  margin 
of  profit  they  can  do  business. 

Mr.  Saunders.  That  is  all  right. 

Mr.  Dearborn.  Take  in  our  own  case:  We  liave  shi})s  that  cost 
$20,000,000,  and  our  capital  is  only  $5,000,000.  We  luwe  held  the 
dividends  back  and  put  our  money  into  new  ships. 

Mr.  Saunders.  That  is  a  problem  for  l)usiness  men  to  deal  with, 
to  see  the  extent  to  which  you  are  prospering.  Now,  let  me  take  that 
very  selfsame  illustration.  You  take  a  line  such  as  you  have  spoken 
of,  that  has  been  a  reasonable  line,  and  you  are  making  moderate 
profits — and  we  all  want  to  see  prosperity — and  conditions  come 
along  in  which,  instead  of  making  their  usual  normal  dividends  of 
10  per  cent,  by  reason  of  these  conditions  they  can  dedai-e  for  one 
or  two  or  three  years  100  per  cent  dividend. 

Mr.  Dearborn,  Yes. 

Mr.  Saunders.  Now,  is  there  any  difficulty  in  detei'mining  whether 
that  is  an  imreasonable  rate? 

Mr.  Dearborn.  But  how  are  you  going  to  start  in  to  make  a  rate? 
Are  you  going  to  consider  the  man  who  has  had  the  courage  to  come 
in  and  pay  high  prices  for  ships? 

Mr.  Saunders.  So  far  as  that  is  concerned,  that  does  not  enter 
into  the  question  of  determining  whether  your  rates  are  imreasonable 
or  not. 

Mr.  Dearborn.  Suppose  this  man  who  has  built  the  high-priced 
ships  and  the  man  who  has  the  low-priced  ships  are  in  the  same 
service. 


104  REOULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Saunders.  Yes. 

Mr.  Dearborn.  It  is  not  workable,  I  say,  for  one  company  to  have 
one  rate  and  another  company  to  have  another  rate. 

Mr.  Saunders.  Oh,  no. 

Mr.  Dearborn.  The  rates  have  got  to  be  about  the  same. 

Mr.  Saunders.  Of  course.  But  you  have  in  mind  that  you  estab- 
lish what  for  that  business  would  be  an  unreasonable  return.  If 
under  that  you  made  all  the  conditions  fair,  and  you  made  the  rates 
indiscriminatory,  if  one  man  under  the  law  of  competition  can  not 
live  he  must  go  out,  as  far  as  that  is  concerned. 

Mr.  Dearborn.  The  company  in  the  stronger  position  wouhl  l)e  in 
n  position  to  monopolize  then. 

Mr.  Saunders.  No:  that  is  exactly  what  we  are  going  to  i^revent 
in  this  bill,  because  this  law  will  prevent  monopoly. 

Mr.  Dearborn.  Judge,  supposing  that  we  are  satisfied  with  a  mini- 
mum and  reasonably  low  return  on  our  cai)it;il  or  on  our  lo\v-i)ri('(Ml 
ships. 

Ml*.  Saunders.  Well? 

Mr.  Dearborn.  If  we  made  our  rates  based  on  that,  it  woidd  i)ut 
the  other  fellow  out  of  business. 

jNIr.  Saunders.  AVhat  of  it?  So  the  public  gets  reasonable  rates, 
we  are  not  concerned  what  the  other  fellow  makes.  We  are  not 
concerned  with  that  end  of  it. 

Mr.  Dearborn.  No. 

Mr.  Saunders.  We  are  concerned  with  this  particular  business  be- 
ing conducted  on  a  reasonalile  basis.  I^'^pon  that  foundation  all 
prosperity  is  built. 

Mr.  Dearborn.  As  a  matter  of  fact,  as  far  as  our  own  tratle  is 
concerned,  to  go  back  to  that,  the  Interstate  Commerce  Commission 
has  allowed  the  railroads  to  make  such  low  rates  to  meet  the  canal 
comi)etition  that  our  maxiuuim  rate  is  fixed  at  a  niinimmn.  In 
dealing  Avith  that  case  they  allowed  the  railroads  to  fix  a  rate  based 
upon  an  out-of-pocket  cost;  that  is  to  sa.v,  ''What  does  it  actually 
cost  you  to  carry  this  particular  commodity?  So  much."  And  it 
is  about  a  dollar  a  ton  in  excess  of  that.  "Well.  y<ni  can  make  this 
rate."  It  is  directed  against  this  canal  service.  We  who  have  to 
pay  a  toll  of  almost  a  dollar  a  ton  have  to  take  that  dollar  otl'.  and 
naturally  Ave  have  to  take  freight  at  a  lower  rate  than  the  railroads. 
You  might  say  I  am  speaking  to-day  in  rather  an  academic  way. 
So  far  as  our  oAvn  business  is  concerned,  we  are  so  regulated  now  by 
the  Interstate  C(>mmerce  Commission's  permission  to  the  railroads 
to  meet  canal  competition  that  there  is  no  danger  of  our  ever  charging 
any  excessive  rates  or  showing  excessive  profits. 

Mr.  Sai-.ndehs.  You  then  feel  that  you  have  been  regulated  (' 

Mr.  Deahbohx.  We  have  been  i-egulated.- 

Mr.  Sauxdkks.  ^'ou  have  been  i-egulated? 

Mr.  Deahboux.  We  have  been  regulated. 

Mr.  Saunders.  And  now,  as  a  result  of  that,  if  you  find  that  with 
your  rates  you  can  make  a  profit 

Mr.  Dearborn.  My  dear  sir,  we  are  out  of  the  business. 

Mr.  Saunders.  What  business  are  you  speaking  of? 

Mr.  Dearborn.  The  canal  is  closed.  We  were  in  business  between 
New  "I'ork.  PuL^'t  Sound,  and  Hawaii.    We  had  a  fleet  of  26  steamers. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  105 

Mr.  Saunders,  Do  you  mean  you  liave  j^one  out  of  that  per- 
manently ? 

Mr.  D?:akbokx.  The  canal  closed  last  September. 

Mr.  Saunders.  But  that  is  temporary? 

Mr.  Dearborn.  Yes;  Ave  had  17  ships.  The  canal  remained  closed, 
and  the  prospects  were  that  it  would  be  closed  for  another  year. 

Mr.  Saunders.  What  I  am  getting  at  is,  you  are  not  out  of  it 
permanently? 

Mr.  Dearborn.  No;  but  in  ser\'ing  ourselves  and  enjoying  these 
very  high  rates  in  going  into  the  foreign  trade  we  are  doing  some- 
thing for  the  foreign  trade,  too.  Judge  Alexander  said  to  me  four 
or  five  days  ago,  "  Why  don't  you  go  into  the  South  American  trade?'' 
We  have  13  ships  in  the  South  American  trade,  and  I  assure  you  we 
are  not  making  any  sacrifices. 

The  Chairiman.  Of  course  you  are  not.  I  would  like  for  you  to 
explain  what  foreign  trade  you  are  operating  in. 

Mr.  Dearborn.  We  have  one  ship  going  to  Vladivostok,  one  going 
to  France,  and  one  going  to  South  Africa. 

Mr.  Saunders.  I  thought  you  meant  the  closing  of  the  canal  had 
put  you  out  of  business. 

Mr.  Dearborn.  No  ;  it  served  us  well. 

Mr.  Saunders.  It  put  you  in  a  better  business? 

Mr.  Dearborn.  Yes;  I  am  not  making  any  complaint. 

Mr.  (treene.  Is  not  that  on  accoimt  of  the  abnormal  conditions? 

Mr.  Dearborn.  Oh,  yes. 

Mr.  Greene.  Ordinarily  you  would  not  have  been  there. 

Mr.  Dearborn.  I  take  it  that  if  you  had  power  to-day  to  fix  these 
rates  that  you  would  expect  your  board  to  reduce  the  present  abnor- 
mal rates  of  freight? 

Mr.  Hardy.  We  certainly  would. 

Mr.  Dearborn.  That  is  what  you  would  expect.  Judge  Hardy,  and 
let  us  see  hoAv  that  would  work.  The  rates  ruling  from  Ncav  York 
to  England  and  France  are  $25  a  ton.  You  want  to  reduce  those 
rates  to  $10  a  ton.  Who  gets  that?  The  ammunition  maker.  Noav, 
getting  I'ight  doAvn  to  the  question  of  interest,  you  are  more  interested 
in  the  steamship  company  than  you  are  in  the  ammunition  man. 

The  (^iiAiR:NrAN.  But  00  per  cent  of  our  foreign  trade,  or  more  than 
that,  is  in  food  products. 

Mr.  Dearborn.  I  knoAv :  but  in  the  products  of  munitions  there  is 
a  case  in  hand. 

Mr.  Hardy.  When  you  have  raised  the  price  on  our  cotton  shippers 
from  $1.50  to  $15  a  bale.  Avliere  it  did  not  go  into  a  Avar  zone  or  get 
into  any  danger,  not  including  insurance  or  anything  of  that  kind,  Ave 
think  something  ought  to  be  done. 

Mr.  Dearborn.  We  think  it  is  terriffic;  but,  at  the  same  time,  the 
cotton  man  is  getting  as  much  for  his  cotton:  the  other  fellow  is 
paying  for  it. 

iVIr.  Hardy.  NotAvithstanding  the  fact  that  he  is  paying  for  it, 
when  you  raise  the  price  of  cotton  to  the  point  Avhere  peo])le  Avill  not 
buy  you  can  not  get  the  consumption  of  it;  those  people  can  not 
consume  it. 

The  Chairman.  He  thinks  the  cotton  man  oyght  to  be  satisfied 
with  bottom  prices  where  the  steamship  man  gets  the  Avar  prices. 

Mr.  Dearborn.  Well,  the  other  felloAv  fixes  the  price. 


106         HKGULATORY  FEATURES  OP'  SHIPPIXO  BII.I.. 

Mr.  IIahdy.   You  lune  said  the  other  fellow  fixes  the  price? 

Mr.  DEAnu<ii;x.  The  American  ships  are  in  the  minority;  the  for- 
eign shii)s  fix  the  price. 

Mr.  IlAifDY.  1  am  talking  al)OUt  the  man  who  fixes  the  price  to  the 
shipper. 

Mr.  Ei),Ai(»Ni)s.  Mr.  Dearborn,  let  me  ask  you  a  (luestion.  What 
would  you  do  if  this  boa  id  was  now  in  existence  to-day.  and  where 
freight  is  $-25  a  ton  should  reduce  it  to  $10  a  ton :  Avhat  would  you  do 
with  your  ships?    Would  you  continue  to  run  them  at  $10  a  ton? 

Mr.  Deauborn.  In  the  first  place,  I  would  look  out  and  see  if  we 
could  not  get  freight  somewhere  else. 

Mr.  En:M()Ni)s.  You  would  see  if  you  could  not  get  freight  froui 
Argentina  to  London  '. 

]\Ir.   Di:aiju()1{x.  Yes. 

Mr.  Edmonds.  Or  from  Vancouvei-  to  China? 

Mr.  DEAur.oHX.  Yes.  sir. 

Mr.  Edmonds.  Or  from  Vancouver  to  South  America? 

Mr.  Dearboun.  Yes.  The  first  effect  Avould  be,  under  the  high  rates 
now — there  is  more  freight  than  the  ships  can  cari-y,  and  thei-efore  if 
3^ou  are  going  to  i-educe  our  rate  on  this — Ave  are  not  engaged  our- 
selves in  taking  freight:  we  have  time-chartered  oui-  ships 

Mr.  P^D:\roNDs.  I  am  asking  you.  ns  a  shipowner,  what  would  be  the 
natural  thing  to  do? 

Mr.  Dearborn.  As  a  shijiowncr.  1  would  go  where  I  could  get  the 
highest  price. 

Mr.  Edmonds.  You  Avould  not  care  whether  the  ships  run  from  Ar- 
gentina to  Australia,  as  long  as  you  got  the  highest  price? 

Mr.  Dearborn.  Oh,  no. 

Mr.  Edmonds.  In  other  words,  yon  Avould  sto])  running  them  in 
this  traffic  and  go  wliei'e  you  could  get  the  highest  prices? 

Mr.  Dearborn.  Oui-  duty  to  our  stockholders  is  to  get  the  highest 
price  Ave  can. 

Mr.  Eoave.  Do  vou  tliink  that  if  Judge  Hardv  had  a  l)ale  of  cotton 
to  sell  he  AA'ould  sell  it  for  $10  if  he  covdd  get  $-20? 

Mr.  Dearborn.  I  have  more  respect  for  .Judge  Hardy  than  that. 

Mr.  Hardy.  You  understand  that  I  said  that  I  did  not  blame  them 
foi'  charging  $25  a  ton  if  they  can  ^i^i  it. 

Mr.  Dearborn.  No. 

Mr.  Hardy'.  And  I  do  not  blame  the  railroads  for  charging  three 
times  the  freight  rates  they  do  noAV.  but  I  do  say  the  Auierican  peo- 
ple are  hardly  capable  of  self-govei-nment  if  they  permit  the  public 
functionaries,  the  quasi-public  institutions  like  railroads  and  great 
steamship  linos,  to  charge  unrestricted  i-ates.  It  is  not  that  T  blauie 
the  raiboad  lines 

Mr.  Dearisorn.  I  understand. 

Mr.  Hardy  (continuing).  And  the  steamship  lines  for  chargingtwice 
as  jHuch  for  freight,  but  if  Ave  as  a  people  have  no  poAvei-  to  regulate 
those  freights  under  reasonable  conditions  we  are  a  Aveak  people,  and 
if  Ave  have  the  i)OAver  and  do  not  use  it  it  is  our  fault  and  not  the  fault 
of  the  people  Avho  charge  those  rates. 

Mr.  Dearborn.  Let  us  take  a  concrete  case.  Suppose  the  board 
was  to  reduce  the  rates  on  a  shij);  say  Ave  take  a  rate  of  freight  and 
reduce  it  to  $10  a  ton.  Avho  is  going  to  get  the  benefit?     vSuppose  the 


EEGULATOKY    FEATURES    OF    SHIPPING    BILL.  107 

shipper  gets  the  benefit  of  it  (thi'ow  out  the  idea  or  theory  tliat  the 
purchaser  or  receixei-  on  the  other  side  pays  the  price),  or  suppose 
the  farmer  gets  the  heuefit.  or  supjiose  the  manufacturer  gets  the 
benefit,  are  you  going  to  reguhite  his  price? 

Mr.  Hardy.  Somebody  has  got  to  get  it. 

Mr.  Dearbokx.  Is  not  he  getting  $10  a  ton  more  than  he  sliould. 
Why  shouhl  the  money  be  taken  ont  of  the  shipowner  and  trans- 
ferred to  the  manufacturer  or  the  farmer? 

Mr.  Hardy.  The  same  question  could  be  asked,  and  was  asked  by 
the  railroads  when  we  started  to  regulate  them,  and  every  railroad 
in  the  country  kicked  like  a  bay  steer  over  the  idea  that  the  (xovern- 
ment  should  undertake  to  regulate  its  rates. 

Mr.  Dearborn.  Yes,  sir. 

Mr.  Hardy.  To-da.y  the  railroads  themselves  realize  tliat  it  has 
been  a  great  benefit  to  them. 

Mr.  Dearborn.  Yes.  sir. 

Mr.  Hardy.  The  public,  I  think,  has  not  gotten  as  much  benefit 
out  of  that  as  the  railroads. 

ISfr.  Dearborn.  I  think  the  railroads  have  really  gotten  more  out 
of  the  interstate-commerce  act.  Why?  Because  it  has  jjrevented 
them  from  comjieting. 

Mr.  Hardy.  Exactly;  that  is  the  idea.  Now,  the  difference  is 
simply  this:  While  to-day  competition  is  desired  there  has  been  a 
restraining  hand  of  the  Government  to  keep  competition  from  being 
absolutely  oppressive.  The  difference  is  that  your  shi])  lines  on  the 
ocean  in  the  international  and  coastwise  trade  have  formed  an  in- 
finite number  of  combinations,  and  they  have  the  power  of  destroy- 
ing competition  without  any  restraining  power  of  the  Government, 
unless  we  pass  some  bill  like  this. 

Mr.  Dearborn.  Oh,  but  the  limitation  of  ship  combinations  are 
so  great  as  compared  to  the  unlimited  opportunities  of  railroads,  if 
tliey  had  a  free  hand,  that  there  is  no  comparison. 

Mr.  Hardy.  It  is  just  possible  that  you  can  not  oppress  quite  as 
much  by  combination;  but  it  has  been  demonstrated  through  two 
years  of  hearings  before  this  committee  that  on  the  Lakes,  in  the 
coaostwise,  overseas,  and  everywhere  your  regular  lines  are  in  vast 
combinations  from  the  Mediterranean  to  NeM'  York  and  everywhere, 
and  that  they  by  conferences  fix  their  rates,  their  divisions,  the  earn- 
ings, and  tlieir  poolings.  You  have  no  competition  of  that  kind. 
Competition  has  practically  died  out,  except  a  few  tramp  steamers. 
And  then,  that  being  the  case,  are  you  going  to  \\i\\e  combination 
Avithout  iiny  lestraiut  at  all? 

Mr.  Dearborn.  But.  Judge,  just  think  Avhat  a  small  investment  it 
takes  to  break  up  a  combination  of  ships.  You  can  not  break  u]^  a 
combination  of  railroads.  You  will  admit  that  is  out  of  the  question, 
where  Ijillions  of  dollars  are  involved. 

]Mr.  Hardy.  I  say  the  evidence  is  before  us  that  you  can  not  break 
up  these  combinations  on  the  oceans. 

Mr.  DEARBOitN.  If  there  are  four  or  five  lines  in  a  combination  on 
the  ocean  charging  exorbitant  rates  you  can  go  in  there  with  four 
or  five  shii)s  and  blow  it  wide  open. 

Mr.  Hardy.  Did  you  hear  old  man  Bull's  testimony  about  his 
difficulties?    He  got  there  finally.    He  is  on  the  inside  now. 

Mr.  Dearborn.  How  did  he  get  there? 


108  REGULATOKV    FEATURES    OF    SlllFl'INi;    BILL. 

Mr.  Hardy.  He  got  there  by  persuading  them  to  take  him  in. 

Mr.  DEARBOR^'.  I  understand  that  okl  man  Bull  was  taken  in  and 
he  made  them  buy  him  out;  then  he  became  an  independent  and 
made  them  take  him  in  again. 

Mr.  Hardy.  He  has  had  quite  a  lot  of  ups  and  doAvns,  and  any 
other  man  Avho  e^er  tried  to  run  against  this  crowd  has  to  have  the 
same  experience  that  he  had  as  to  the  methods  thej'  pursue. 

Mr.  Dearborn.  Why  does  not  this  committee,  l3efore  it  commits 
itself  to  this  bill,  have  a  subcommittee  make  a  study  of  the  prac- 
ticabilit}^  of  fixing  rates. 

^Ir.  Hardy.  How  long,  how  many  years,  would  you  ha\e  us  make 
a  stud\'?  This  committee  has  been  studying  this  (juestion  for  the 
past  two  or  three  years. 

Mr.  Dearborn.  My  Heavens,  and  here  I  am  coming  here  repre- 
senting our  compan}^,  which  is  in  the  foreign  trade,  and  in  our  trade, 
as  our  rates  are  fixed,  they  are  low  by  reason  of  the  competition  of 
the  railroads.     I  do  not  think  this  bill  is  going  to  aifect  us. 

Mr.  Hardy.  Do  3'ou  mean  to  say  that  the  transcontinental  rail- 
roads compete  with  your  ships  through  the  canal  fi'om  Xew  '^'oi-k  to 
San  Francisco? 

Mr.  Dearborn.  Oh,  they  would  not  take  our  business  away. 

Mr.  Hardy.  They  can  not  compete  with  3'ou  ? 

Mr.  Dearborn.  Yes;  they  can  reduce  their  rates. 

Mr.  Hardy.  Can  they  carry  coal  for  less  than  twice  what  it  costs 
you  to  carry  coal? 

Mr.  Dearborn.  Oh,  yes;  oh,  my,  yes. 

Mr.  Hardy  Does  not  the  freight  cost  you  half  as  much  to  carry  it 
from  New  York  by  water  to  San  Francisco  as  it  does  the  trans- 
continental lines? 

Mr.  Dearborn.  But,  I  say,  the  rate  of  freight  they  are  making — 
I  will  give  you  an  example:  The  transcontinental  lines  are  carrying 
canned  goods  at  $8  a  ton. 

^fr.  RoM'E.  You  mean  from  Seattle  to  Xew  York  ? 

]\ri-.  Dearborx.  From  San  Fi-ancisco  to  New  York,  foi'  $.'^  a  ton: 
and  we  natui-ally  have  to  take  it  at  a  lower  rate. 

Mr.  Burke.  Does  not  the  difl'ereuce  in  that  cost  arise  by  reason  of 
the  question  of  time?  In  the  transportation  of  canned  goods  and 
fruits,  the  railroads  make  better  time,  and  for  that  reason  the 
.shipper  is  forced,  in  oi-der  to  i-each  the  market  while  his  goods  are 
in  good  c(mdition.  to  use  the  railroads. 

Mr.  Dearborn.  Oh,  no;  our  time  is  satisfactoi-y. 

Mr.  Burke.  How  long  does  it  take  you  to  transport  a  cargo  from 
San  Francisco  to  New  York? 

Mr.  Dearborn.  Twenty  days. 

Mr.  Burke.  How  long  does  it  take  a  fast  freight? 

Mr.  Dearborn.  Oh,  12  to  25  days,  so  that  the  difference  in  time 
does  not  really  count  very  much. 

Mr.  KowE.  What  Avere  they  charging  before  the  canal  opened? 

Ml-.  Dearborn.  Fiffhtv-five  cents  a  lumdred. 

Mr.  Hardy.  That  was  $17  a  ton? 

Mr.  Dearr.orx.  They  reduced  the  rate  of  freight  from  a  maximum 
of  85  cents  a  hundred  to  a  maximum  of  40  cents  a  hundred.  The  idea 
of  the  canal  was  to  i-egulate  transcontinental  rates,  and  it  certainly 
has. 


REGUI.ATOin'    FKATUKES    OF    SHIPPING    BILL.  109 

Mr.  Hardy.  That  simply  means  that  the  raih-oad  lines  have  been 
allowed  to  make  the  intermediate  points  pay  for  the  low  rates  to  vSan 
Francisco. 

Mr.  Dearbokx.  Yes;  there  is  a  big  complaint  now  from  Spokane. 
Yon  know  the  rates  for  the  longer  haul  are  nnreasonably  low. 

Mr.  Hardy.  That  does  not  mean  that  the  railroads  can  compete 
with  yon.  but  by  taxing  the  intermediate  points  they  are  making  low 
rates  which  compete  Avith  yon. 

Mr.  Dearborn.  Yes;  the  railroads  can  make  it  up  on  their  aA^erage. 

Mr.  Hardy.  I  only  hope  the  time  will  come  Avhen  that  average  Avill 
be  regulated,  too. 

Mr.  Edmonds.  Mr.  Dearborn,  yon  are  bringing  sugar  from  Hawaii 
to  San  Francisco  and  shipping  it  to  NeAv  York  by  rail,  and  to  Phila- 
delphia, are  you  not? 

Mr.  Dearborn.  We  are. 

Mr.  Edmonds.  What  is  the  difference  betAveen  the  cost  of  that 
service  between  HaAvaii  and  Ncav  York  or  Philadelphia,  this  way, 
and  through  the  canal? 

Mr.  Dearborn.  Well,  Ave  had  a  canal  rate  of  47^  cents  a  hundred. 

Mr.  Edmonds.  From  Hawaii  to  New  York? 

Mr.  Deiarborn.  Yes;  and  Ave  are  paying  the  railroad  GO  cents  a 
hundred  from  San  Francisco. 

Mr.  Edmonds,  Sixtj^  cents  a  hundred? 

Mr.  Dearborn.  That  seems  entirely  out  of  line  Avith  the  canned- 
goods  rate,  does  it  not,  of  40  cents  a  himdred? 

Mr.  Edmonds.  Yes:  it  does. 

Mr.  Dearborn.  We  are  contributing  tAvo  ships  to  carry  sugar  from 
the  islands  to  San  Francisco  free — donated. 

Mr.  Edmonds.  You  are  doing  that  w^ork  for  nothing? 

Mr.  Dearborn.  Why?  Because  it  releases  13  ships  for  this  other 
and  better  business. 

Mr.  Edmonds.  You  are  carrying  sugar  free  from  HaAvaii  to  San 
Francisco  and  paying  the  railroads  60  cents? 

Mr.  Dearborn.  Forty-seven  and  a  half  cents  is  our  rate  and  60 
cents  is  the  railroad  rate. 

Mr.  Hardy.  I  do  not  understand  Avhy  you  carry  this  sugar  to  San 
Francisco  for  nothing. 

Mr.  Edmonds.  The  canal  is  closed  and  they  were  under  contract  to 
carry  this  sugar  and  get  it  over  to  the  refineries  on  the  eastern  coast. 
They  have  agreed  to  carry,  temporarily,  sugar  from  HaAvaii  to  San 
Francisco  for  nothing,  and  the  railroads  are  now  charging,  as  he  says, 
60  cents  to  carry  it  across  the  continent.  That  is  $4  a  ton  more  than 
they  are  charging  for  canned  goods. 

Mr,  Dearborn.  And  it  is  much  better  freight  to  handle. 

Mr.  Saunders.  They  are  not  really  doing  it  for  nothing  then ;  they 
are  doing  it  in  order  to  compl.y  with  their  contract. 

Mr.  Dearborn.  It  releases  iS  ships,  and  it  is  good  business. 

Mr.  Saunders.  You  are  not  doing  it  for  nothing,  then. 

The  Chairman.  But  you  Avould  have  brought  your  sugar  around 
the  Horn  while  the  canal  Avas  closed  if  it  had  not  been  for  these  large 
rates  in  other  trades  of  Avhich  you  are  taking  advantage? 

Mr.  Dearborn.  We  would  liaA'e  kept  in  the  general  service  after  the 
canal  closed  the  last  of  last  September,  or  continued  our  Magellan 
serA'ice.    But  it  is  a  longer  route,  50  days  compared  to  20.  Avhich  made 


110  HKGULATORY    FEATURES    OF    SHlPPlNd    HILL. 

it  undesirable;  and.  furthermore,  the  embariro  on  traffic  whicli  the 
lines  put  on  all  freight  between  Chicago  and  Xew  York  made  it  so 
difficult  for  us  to  get  it  through  and  difficult  to  get  freight  to  our 
mills  in  our  westbound  service. 

There  was  a  prospect  of  the  canal  remaining  closed,  as  Col.  Goe- 
thals  stated  not  long  ago,  for  six  months  more,  or  perhaps  for  a 
year  more,  so  we  said,  "What  is  the  use?  Why  should  we  make  a 
sacrifice?"  Our  biggest  shipper  in  Seattle,  the  biggest  hardware 
concern,  Avho  has  been  friendly  to  us.  told  us :  "  We  liave  no  use  for 
your  service  now." 

Mr.  Edmonds.  AA'e  had  the  head  of  the  Canneries  Trust  from  San 
Francisco  before  us  the  other  day,  one  of  3'our  interests,  complaining 
very  bitterly  about  freight  rates. 

Mr.  Dearborn.  There  are  no  rates  to  complain  about. 

Mr.  Edmonds.  I  just  wanted  to  see  whether  he  had  much  to  com- 
plain about  Avhen  he  gets  $8  a  ton  across  the  continent  and  the  San 
Francisco  sugar  men  have  to  pay  $12. 

Mr.  Dearborn.  That  is  from  San  Francisco.  The  rate  from 
Seattle  is  a  little  higher. 

Mr.  Edmonds.  What  I  wanted  to  bring  into  the  hearing  was  that 
he  paid  about  half  for  the  fruit  in  San  Francisco  this  year  that  he 
did  last  year  on  account  of  the  Avar. 

Mr.  Dearborn.  He  did  not  appeal  to  your  sympathy,  did  he? 

Mr.  Edmonds.  Not  particularly  to  mine.  I  think  he  is  a  kind  of  a 
skin,  myself. 

Mr.  Greene.  Are  you  familiar  with  the  Lake  rates,  because  a  sug- 
gestion was  made  here,  I  think,  in  the  conversation  that  the  freight 
rates  on  the  Lakes  had  been  exorbitant?  I  thought  maybe  you  knew 
what  they  Avere. 

Mr.  Dearborn.  No;  I  am  not  familiar  with  them  at  all. 

Mr.  Greene.  At  present,  without  this  law  being  in  existence,  if 
you  made  a  contract  for  a  portion  of  your  cargo  and  ,you  wanted  to 
fill  up  the  balance  you  could  do  so,  and  at  any  price  you  could  get, 
so  as  to  carry  a  full  cargo? 

Mr.  Deareiorn.  Yes. 

Mr.  Greene.  What  is  your  idea  as  to  your  ability  to  do  that  to- 
day if  this  hnv  were  in  effect? 

Mr.  Dearborn.  Under  this  10-day  notice? 

Mr.  Greene.  Yes. 

Mr.  Dearborn.  Oh,  it  would  operate  very  much  against  us;  it 
would  deprive  us  of  an  opportunity  that  might  be  available,  and  it 
Avould  deprive  the  shipper  of  that  opportunity  to  get  that  space  at  a 
reduced  rate. 

Mr.  (treene.  Y^our  vessel,  under  the  law  as  it  is  drawn  now,  if  you 
were  under  that  law,  you  could  only  carry  a  part  cargo,  because  you 
would  be  unable  to  name  a  price  on  which  you  could  fill  up  your 
cargo.  And,  really,  the  question  Avould  be  whether  you  could  name 
one  price  for  a  cargo,  for  the  part  you  had  loaded,  and  then  name 
another  price  on  caigo  to  fill  up  the  balance  of  your  ship,  under  this 
bill,  in  your  judgment? 

Mr.  Dearborn.  Y^es. 

jNIr.  (treene.  Do  you  think  you  could? 

IVfr.  Dearborn.  No;  it  would  very  much  hamper  ships,  which 
would  have  to  go  out  with  that  space. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  Ill 

Mr,  (iREEKE.  Unless  you  could  get  into  communication  with  the 
shipping  board  ? 

Ml".  Dearborn.  Yes. 

Mr.  Greene.  And  if  you  were  a  long  distance  away  you  would  not 
be  very  apt  to  do  it,  unless  3'^ou  worked  the  wireless? 

Mr.  Dearborn.  No.  What  we  have  been  hoping  for  for  years  is  a 
merchant  marine,  and,  my  Heavens,  it  has  come  ! 

The  Chairman.  Where  is  it? 

Mr.  Dearborn.  A  hundred  ships  building  in  this  country,  and  a 
good  many  have  been  transferred  to  the  flag,  and  capital  interested 
in  ships  and  going  into  ships  as  it  never  has  gone  into  it  before. 

The  Chairman.  Is  your  comi)any  building  any  more  ships? 

Mr.  Dearborn.  We  have  just  built  three  ships.  We  were  consider- 
ing building  two  more  ships  carrying  about  13,000  tons  each. 

The  Chairman.  What  other  companies  are  building  ships  to  put 
under  the  American  flag? 

Mr.  Dearborn.  Why,  the  Grace  Co.,  I  believe 

Mr.  Sherman.  Are  building  four. 

The  Chairman.  Are  they  going  to  put  them  under  the  American 
flag  or  under  a  foreign  flag? 

Mr.  Sherman.  Under  the  American  flag. 

Mr.  Dearborn.  I  think  all  the  ships  that  are  built  in  this  country, 
Judge,  are  likely  to  stay  under  the  American  flag. 

Mr.  Greene.  PIow^  about  the  Morse  Ship  Co.? 

Mr.  Dearborn.  Which  Morse? 

Mr.  Greene.  Charles  W.  Morse. 

Mr.  Dearborn.  Was  Mr.  Morse  taken  seriously? 

Mr.  Greene.  A  gentleman  came  here  and  testified  before  us  that 
Charles  W.  Morse  controlled  three  or  four  shipyards  and  he  is  build- 
ing ships  at  lightning  speed,  and  could  furnish  the  Government  as 
many  vessels  as  we  wanted. 

Mr.  Edmonds.  And  that  he  had  25  ships  hidden  away  somewhere. 

Mr.  Dearborn.  I  think  it  is  beneath  my  dignity  to  discuss  Mr. 
Morse. 

Mr.  Greene.  I  Avas  not  discussing  Mr.  Morse.  The  gentlemen  I 
was  referring  to  claimed  that  he  controlled  several  shipyards,  and 
named  one  at  Noack,  Conn. 

Mr.  Dearborn.  Oh,  there  are  a  number  of  ships  being  built  on  the 
Lakes  for  ocean  service. 

Mr.  (treene.  He  said  Mr.  Morse  was  building  a  large  number  of 
vessels  and  could  get  a  dozen  or  25  ships  and  could  furnish  the  Gov- 
ernment with  them  at  once.  I  wanted  to  know  if  they  were  floating 
around  in  the  air. 

Mr.  Dearborn.  I  know  a  concern  that  is  building  four  ships  in 
Bath,  at  the  old  Sewell  yard  there.  We  were  talking  about  building 
two  steamers,  and  to  tell  you  the  truth,  it  came  up  to  us  about  the 
menace  of  this  rate  regulation.  I  have  been  in  this  business  for  42 
years.  I  Avent  into  it  as  a  boy  and  grew  up  in  the  business,  and  my 
partner  w^ent  into  it  as  a  boy,  but,  my  Heavens,  if  we  have  got  to 
be  haled  to  Washington  and  to  be  controlled  as  a  railroad,  and  with- 
out the  compensating  advantages  that  a  railroad  has.  You  have 
got  to  consider  the  difference  between  the  railroad  and  the  ship  busi- 
ness. The  steamship  companies  are  built  up  with  private  capital. 
You  know  hoAv  the  railroads  were  built  up.     You  know  it  probably 


112  ItKGri.ATOKV    i'EATLKES    OF    SHIPPING    BILL, 

(lid  not  cost  the  promoters  an.Ything.  A  const  ruction  company  made 
a  contract  and  sold  the  bonds,  and  the  stock  cost  the  promoter 
nothing.    That  has  been  the  history  of  raih-oads. 

Mr.  Greene.  And  they  have  had  large  land  grants. 

Mr.  De.vi!Boi!.\.  In  the  steamship-owing  business  the  people  have 
gone  into  their  pockets,  into  their  jeans,  and  put  their  good  money 
into  it.  AVhen  1  first  went  into  this  business  IT  years  ago  I  risked 
every  dollar  T  had  in  it. 

Mr.  lI.MtDY.  Did  not  the  peoi)le  who  furnished  the  money  to  build 
the  railroads  lisk  their  money  in  the  railroads,  too  ^ 

Mr.  Dr-AitnoKN.  'J'he  promoteis  did  not  care  for  that. 

Mr.  Haiu)y.  Haven't  you  had  some  promoters  in  the  steamship 
business '( 

Mr.  Dearbokx.  I  think  we  have  had  a  few;  there  have  been  a  few 
I  suppose.  I  think  there  ha^"e  been  a  few  promoters  in  the  steamship 
business. 

Mr.  Sauxders.  As  far  as  the  people  who  paid  for  stock  in  the  rail- 
road company  are  concerned,  they  had  to  go  down  in  their  jeans. 

Mr.  Hardy.  Is  it  your  idea,  Mr,  Dearborn,  that  the  provisions  of 
this  bill,  in  so  far  as  they  relate  to  these  interstate-connnerce  carriers 
by  water,  would  put  you  and  the  other  interstate  carriers  out  of 
business:  that  you  ^^ould  lune  to  letire  from  that  trailic? 

Mr.  Deahhorx.  No;  I  do  not  imagine  it  would. 

Mr.  IIakuy.  You  will  be  able  to  conduct  business  in  the  interstate 
traffic  even  if  this  bill  passes  ? 

Mr.  Dearborn.  Yes;  but  I  think  we  a\  ill  be  very  much  hampered. 

Mr.  Hardy.  Your  idea  is  that  the  opportunity^  for  profit  in  the 
future  would  not  be  as  great  if  what  you  would  conceive  to  be  the 
hampering  provisions  of  this  bill  were  enacted  into  law  as  they  are 
at  present? 

Mr.  Dearborn.  As  a  matter  of  fact,  I  say  that  the  big  concerns 
with  a  great  number  of  ships  in  a  regular  service  would  probably 
stand  the  operation  of  this  bill  better  than  the  small  ships.  Now,  it 
conies  down  to  the  question  whether  the  tramp  is  to  be  regulated  as 
well  as  the  regular  line. 

Mr.  Hardy.  You  have  tramps  in  the  interstate  business? 

Mr.  Dearborn.  Yes.  I  claim  the  tramp  is  a  great  natural  rate 
regnlator. 

Mr.  HAitDY.  AVhat  I  am  trying  to  get  at  now  is  the  interstate  com- 
merce traffic  and  not  the  foreign  traffic, 

Mr.  Dearbokx.  I  am  talking  about  the  interstate  traffic. 

Mr.  Hardy.  Are  there  any  tram]:)s  to  amount  to  anything  in  our 
interstate  ti-affic? 

Mr.  Dearborx.  Between  New  York  and  San  Francisco;  oh,  my, 
yes.  There  are  so  many  shii)s  that  are  carrying  lumber  from  the 
Pacific  coast,  you  knoAv,  and  seeking  a  cargo  back.  We  had  all  kinds 
of  competition  with  tramp  steamers. 

Mr.  Hardy.  So  far  as  the  other  coastwise  traffic  is  concerned,  the 
bulwark  of  the  interstate-commerce  traffic  by  water,  it  is  not  con- 
ducted by  what  you  would  call,  properly  speaking,  tramp  ships? 

Mr.  Dearp.orx.  No.  It  is  mostly  short- voyage  business;  voyages 
of  three  or  four  days,  with  sailings  every  other  day,  carrying  pas- 
sengers and  high-class  freight.  A  ti-amp  can  not  go  into  that  busi- 
ness. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  113 

Mr.  Hahdi-,  You  take  those  fellows  who  run  on  a  pretty  regular 
schedule,  with  definite  trips,  there  would  be  no  difficulty  in  their 
conforming  to  the  requirements  of  this  law  ? 

Mr.  Dearborn,  No;  I  do  not  think  so. 

Mr.  Hardy.  That  would  not  be  hampered  ? 

Mr.  Dearborn.  No;  because  under  their  arrangements  with  the 
railroads,  a  good  deal  of  their  freight  goes  to  interior  points  on  th« 
railroads. 

Mr.  Hardy.  You  say  they  are  already  under  regulation^ 

Ml.  Dearborn.  Yes. 

Mr.  Hardy.  Then  this  bill  would  not  affect  them  at  all^ 

Mr.  Dearborn.  I  do  not  think  it  would  affect  them  at  all,  but  the 
conditions  are  so  different  in  different  trades. 

Mr.  Hardy.  There  is  an  illustration  you  observe  in  reaching  this 
very  commerce  you  speak  of.  there  is  a  class  of  business  going  on, 
apparently  prospering,  that  is  already  required  to  conform  to  rea- 
sonable rates. 

Mr.  Dearborn.  Their  position  is  the  same  as  ours.  So  far  as  fixing 
the  maximum  rates,  the  railroads  with  which  they  are  in  competi- 
tion really  fix  the  maximum. 

Mr.  Hardy.  And  their  rates  are  fixed  for  them  by  the  Interstate 
Commerce  Commission  ? 

Mr.  Dearborn.  They  are  fixed  for  them  by  the  Interstate  Com- 
merce CommissioiL 

Mr.  Hardy.  So  you  get  back  to  Government  regulation  ? 

Mr.  Dearborn.  Yes,  sir;  indirectly. 

Mr.  Greene.  Do  you  tliink  there  is  any  way  possible  under  this  bill 
to  regulate  the  foreign  shipowner  in  the  transaction  of  his  business  in 
competition  with  the  American  shipowner? 

Mr.  Dearborn.  I  understand  the  i)urposes  of  this  bill  are  to  regu- 
late both  foreign  and  American. 

]Mr.  Greene.  How  far  could  that  be  carried  on? 

Mr.  Dearborn.  I  have  said,  Mr.  Greene,  that 

Mr.  (iREENE,  In  competition  between  London  and  any  points  in 
Brazil,  or  in  Chile,  or  anywhere  else,  it  could  not  regulate  that  at  all, 
could  it? 

Mr.  Dearborn.  No;  I  do  not  see  how  a  steamship  manager  here 
could  be  responsible  for  any  rates  made  l)etween  London  and  Brazil. 

Mr.  Greene.  That  is,  tliis  shipping  board  would  not  be  able  to 
regulate  any  of  their  rates  in  c(!mpetition  with  the  American  ship- 
owner i 

Mr.  Dearborn.  No. 

Mr.  Greene.  Or  if  a  Canadian  shipowner,  he  could  not  be  regu- 
lated at  all. in  shipping  across  the  water? 

Mr.  Dearborn.  No. 

Mr.  Greene.  But  our  shippers  would  be  regulated  and  ordered  as 
to  what  they  should  do,  and  the  other  ships  would  said  free? 

Mr.  Dearborn.  Oh,  they  would  be  absolutely  free,  and  you  would 
have  a  situation  where  if  these  ships  could  get  business  from  these 
other  ports,  the  shijis  would  be  withdrawn.  Sui)pose.  for  instance, 
this  board  fixed  a  rate,  say,  $15  a  ton  lower  than  the  going  rate. 
These  ships  are  not  going  to  have  these  rates  fixed  arbitrarily.  A 
ship  is  worth  more  than  that.     It  is  true  it  is  an  exorbitant  rate, 

38534—16 8 


114  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

but  if  they  could  not  get  that  rate  they  would  go  to  where  they  could 
get  better  business.  Of  course,  there  would  be  certain  adjustments 
in  this  buisness.  AVhere  ships  Avent  from  our  trade  to  the  other 
trade,  it  would  have  a  tendency  to  lower  the  rates  in  the  other  trade. 
There  is  one  thing  a  shij)  can  do  that  a  railroad  can  not  do.  a  ship 
can  strike. 

The  CiiAiRMAX.  You  are  assuming  that  this  board  would  be  so 
stupid  in  administering  the  law  that  they  would  force  a  strike? 

Mr.  Dkai{bok>\  I  know,  judge,  but  you  read  the  law  and  read  the 
power.  Perhaps  this  Avill  be  administered  in  a  reasonable  way,  but 
you  are  going  to  have  all  kinds  of  individuals  on  the  board,  and 
you  will  hereafter. 

The  Chairman.  AA"e  never  would  haxe  made  one  single  stej)  in 
the  direction  of  regulating  railroads,  or  light  companies,  or  street 
railway  companies,  or  any  other  public-service  corporation,  if  heed 
had  been  given  to  the  objections  you  urge  now. 

Mr.  Dearborn.  But  you  do  not  seem  to  dilferentiate  l»etAveen  the 
status  of  a  railroad  and  a  ship. 

The  Chairman,  I  think  T  do.  T  think  this  boai'd  would  recognize 
the  difference,  too. 

l\fr.  Dearborn.  What  do  we  get  from  the  State;  what  does  the  ship 
get  from  the  State? 

The  Ciiair:\ian.  You  get  a  great  deal  from  the  State. 

Mr.  Dearborn.  No  more  than  a  manufacturer. 

The  Chairman.  Yes;  a  manufacturer  gets  from  the  State,  too. 

Mr.  Dearborn.  He  is  in  the  State  all  the  time,  and  when  a  ship  is 
beyond  the  3-mile  limit  she  is  away  from  the  State. 

Mr.  Hardy.  Let  me  call  your  attention  to  the  fact  that  this  (Jov- 
ernment  si)ends  millions  every  year  imi)i'o\iiig  rixcrs  and  harbors, 
and  the  ships  get  it;  somebody  gets  it. 

The  Chairman.  The  State  is  furnishing  money  out  of  which  you 
get  commerce;  it  has  deepened  the  hai-bors  whei-e  you  get  your  com- 
merce, and  it  is  performing  all  those  sei'vices  for  you.  And  you 
have  a  mistaken  idea  about  the  ship  being  like  a  manufacturer;  trans- 
portation is  sim])ly  an  instrument  of  counuerce.  and  those  nations 
that  recognize  that  fact  are  the  ones  that  are  progressing  most.  Ger- 
many has  recognized  that  transportation  is  siui])ly  an  instrument  of 
connnerce,  ancl  controls  it,  too.  Hence  they  have  State-owned  rail- 
roads and  State-owned  canals,  and  evei-ything  else:  and  exerythiug  is 
regtdated. 

Mr,  Deakuokn.  T  believe,  as  Mr.  Uush  belie\e>.  and  others,  that  capi- 
tal going  in  the  shipping  field  would  feel  that  it  is  a  great  menace  to 
them.     You  do  not  think  that  way. 

The  CiiAiiiMAN.  I  have  been  on  this  couunittee  for  many  years 
past,  and  there  have  never  been  any  suggestions  uiade  that  there  have 
not  been  spooks  raised;  it  is  a  menace  in  one  way  or  a  menace  in  souie 
other  way.  But  it  does  not  make  any  difference  whether  there  is  any 
menace  ov  not,  whether  there  is  anything  d(me  or  not,  you  have  not 
developed  your  merchant  marine  and  foreign  trade  and  you  are  just 
as  impotent  to-day  as  you  ever  were. 

Mr.  Dearborn.  No;  it  is  being  developed.  Take  our  case,  for 
instance.  We  are  prospering.  I  am  looking  forward  to  going  into 
the  foreign  trade  and  building  ships  foi-  the  foreign  trade.     T  think 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  115 

we  have  more  ships  now  than  are  required  for  our  own  trade.  They 
are  already  in  the  foreign  trade  now,  but  that  is  an  emergency,  and 
we  do  not  deserve  any  credit  for  that. 

Mr.  Sauxders.  kSuppose  you  were  on  this  board,  Mr.  Dearborn — 
and  it  has  been  suggested  you  might  very  well  be  on  the  board,  as  it 
is  contemplated  having  men  of  your  type  and  experience  on  the 
b(  :ird — what  is  there  in  this  bill  that  would  compel  3'ou  to  administer 
it  in  such  a  way  as  to  hinder  the  development  of  American  couunerce? 
A\nir.t  is  there  in  this  bill  that  if  you  were  confronted  with  an  inter- 
pi-etation  of  it  you  would  have  to  put  such  an  interpretation  upon  it 
that  it  would  operate  as  a  handicap  to  American  commerce?  Can 
you  lay  your  finger  on  any  section  there  that  you  would  have  to  so 
construe  as  to  hinder  American  dexelopment  ? 

Mr.  Dkarborx.  I  would  say,  right  ort'.  what  is  my  understanding 
of  ;i  reasonable  rate.    AVhat  is  it? 

Mr.  Saunders.  We  will  leave  that  to  you. 

Mr.  Dearborn.  What  are  you  going  to  allow  these  ships  on  the 
investment? 

Mr.  Saunders.  We  will  say  that  you  ask  that  question  of  yourself, 
and  your  colleagues  on  the  board  ask  the  same  question.  In  answer- 
ing that  ({uestion  you  will  get  all  the  factors  that  enter  into  the  equa- 
tion. This  would  ])ermit  you  to  do  that,  would  it  not?  Then  would 
you  not  construe  that  (juestion  of  what  is  a  reasonable  rate.  ha\ing  in 
mind  those  elements,  in  such  a  way  as  to  develop  and  forward 
American  industry,  or  would  you  feel  yourselves  constrained  to  so 
construe  that  as  to  destroy  and  break  down  American  industry? 

Mr.  Dearborn.  1  think  I  would  have  to  come  to  you  as  one  of  the 
legislators  and  get  your  idea. 

Mr.  Saunders.  No;  it  would  be  up  to  you  to  construe  the  bill. 

Mr.  Dearborn.  You  initiated  this  bill,  and  I  shoidd  have  to  come 
to  you  as  the  source  of  power. 

Mr.  Saunders.  You  never  go  to  the  men  who  passed  the  law  for 
its  interpretation. 

Mr.  Dearborn.  Then  I  would  say  to  one  company :  "  You  are 
making  30  per  cent  now.  What  is  the  history  for  the  last  six  years?  " 
"  I  didn't  make  l)ut  5  per  cent."  "  T  think  you  are  entitled  to  a  con- 
siderable profit  for  a  few  years." 

Mr.  Saunders.  That  might  be  a  proper  interpretation. 

Mr.  Dearborn.  I  should  hate  to  ha\e  the  job  of  interpreting  that 
bill. 

Mr.  Saunders.  So  that  you  ^^  ould  be  vested  with  the  power — and 
that  is  all  I  am  saying — to  construe  that  law  in  such  a  way  as  not  to 
destroy  but  to  build  up. 

Mr.  Dearborn.  I  can  not  imagine  any  board  having  the  purpose 
of  this  board  Avishing  to  destroy  this  industry. 

Mr.  Saunders.  Then  the  menace  suggested  in  that  respect  would 
seem  to  be  eliminated. 

Mr.  Dearborn.  Take  that  rate-making  poAver  out,  Judge.  As  ap- 
plied to  ships  the  conditions  of  supply  and  demand  and  competition 
always  fix  the  rates  on  ships  as  reasonable  freights — T  am  not  speak- 
ing of  practices — and,  as  far  as  the  rates  of  freight  in  the  last  15 
years  are  concerned,  that  has  been  true, 

Mr.  Saunders.  If  you  are  charged  with  the  interpretation  of  the 
law  under  these  conditions  that  T  have  supposed,  having  in  mind  nil 


ll(j  HEGUl.ATORV    FEATURES    OF    SHIPPING    BILL. 

of  these  things,  if  you  could  not  interpret  these  things  so  as  to  build 
up  and  forward,  you  would  not  interpret  them  so  as  to  destroy. 

Mr.  Dearborn.  Certainly  not. 

Mr.  Saunders.  Then,  because  they  have  the  power,  it  does  not 
mean  that  it  has  to  be  abused. 

Mr.  Dearrorx.  Do  not  give  anybody  a  power  that  might  be  abused. 

Mr.  8auni)ei{s.  Did  you  ever  realize  that  the  poAver  that  the  Su- 
preme Court  of  the  United  States  has  can  be  so  utilized  as  to  de- 
stroy? Our  ^•ery  institutions  could  be  destroyed  through  interpreta- 
tion by  the  judges  of  the  Supreme  Court. 

Mr.  Dearborn.  Well,  it  is  a  judicial  body. 

Mr.  Sai^nders.  If  it  is  just  the  i)ossibility,  you  need  not  be  dis- 
turbed about  that. 

Mr.  Dearborn.  It  is  a  judicial  body. 

Mr.  Saunders.  We  are  creating  a  judicial  body  here. 

Mr.  Dearborn.  If  you  put  me  on  this  board.  I  do  not  think  T 
would  have  a  judicial  mind. 

Mr.  Edmonds.  Don't  worry,  Mr.  Dearborn:  we  liave  promised  all 
these  positions  already. 

Mr.  Dearborn,  I  am  so  sorry. 

Mr.  Hardy.  I  just  want  to  call  Mr.  Dearborn's  attention  to  one 
thing.  You  said  ctmipetition  regulated  trade  and  freights  in  the 
last  15  years? 

Mr.  Dearborn.  Yes,  sir. 

Mr.  Hardy.  I  do  not  think  you  could  possibly  have  read  the  evi- 
dence taken  before  this  committee  in  the  investigatitm  of  the  Ship- 
ping Trust. 

Mr.  Dearborn.  I  have  read  some  of  it. 

Mr.  Hardy.  If  you  do,  you  will  find  you  are  vastly  nustaken  about 
competition  fixing  the  freight  rates. 

Mr.  Dearborn.  Well,  T  made  some  exceptions  to  that,  if  you  will 
1  emember. 

STATEMENT  OF  MR.  PHIIIP  A.  S.  FRANKLIN,  NEW  YORK,  N.  Y., 
RECEIVER  OF  THE  INTERNATIONAL  MERCANTILE  MARINE 
AND  PRESIDENT  OF  THE  ATLANTIC  TRANSPORT  CO. 

Mr.  Franklin.  Cientlemen.  I  h\\\e  not  i)repai('(l  any  statement  or 
anything  of  that  sort.  I  thought  in  the  general  discussion  of  the 
mattei",  if  I  could  assist  in  giving  any  information  T  would  be  glad 
to  do  my  best  in  that  direction,  i-athei-  than  attempting  to  make  any 
l<!ng  statement  regarding  the  l)ill. 

As  previously  stated  to  you.  the  conditions  in  shipping  to-day  are 
{disolutely  abnormal.  The  United  States  has  an  unheard-of  oppor- 
tunity to  go  into  the  general  foreign  shipi)ing  business,  and  I  believe 
that  it  will  be  taken  advantage  of  unless  some  legislation  is  passed 
that  will  be  too  discouraging;  and  I  am  (|uite  sure  you  gentlemen  do 
not  want  to  do  anything  of  that  sort. 

The  seamen's  bill  is  working  at  the  moment  in  some  ways  that 
are  exceedingly  delrimental.  and  T  strongly  ui'ge  that  you  giv<>  that 
some  consideration. 

As  regards  bill  143;^j7.  as  far  as  the  rebate  policy  is  concerned,  we 
are  in  accord.     As  far  as  fighting  ships  are  concerned  we  are  in 


REGULATORY   FEATURES   OF    SHIPPING   BILL.  117 

accord;  Ave  see  no  objection  to  that.  As  far  as  the  filing  of  agree- 
ments is  concerned  we  see  no  reason  why  this  should  not  be  done,  ex- 
cept that  we  feel  that  if  the  agreements  are  filed  they  should  be,  if 
not  disapproved,  then  excepted  under  the  provisions  of  the  act  of 
Congress  approved  July  2.  1890. 

The  Chairman.  How  is  that  now.  Mr.  Franklin? 

Mr.  Franklin.  In  other  words,  if  we  file  the  agreements  with  this 
commission,  and  after  an  investigation  those  agreements  are  found 
to  meet  with  the  approval  or,  rather,  they  are  not  disapproved  by 
the  commission,  then  we  believe  they  should  be  excepted  from  the 
provisions  of  the  act  of  Congress  approved  July  2,  1890. 

Mr.  Hardy.  We  had  that  so  worded  as  to  make  it  apply  to  the 
(►riginal  agreements. 

Mr.  Franklin.  The  original  agreements,  Mr.  Hardy,  or  any  modi- 
fication of  them,  because  you  give  a  right  later  to  have  them  modified, 
and  if  they  do  not  meet  with  your  a]iproval  to  have  them  corrected. 

Mr.  Hardy.  Onlj'  in  making  corrections,  we  want  some  stability 
in  the  rates.  I  think  we  would  agree  on  that  if  we  could  get  some 
language  to  eft'ect  it.  There  is  to  be,  first,  a  rate  fixed;  that  has 
got  to  be  fixed. 

Mr.  Franklin.  This  does  not  make  any  instability  in  the  rate 
fixing,  Judge  Hardy. 

Mr.  Hardy.  I  mean  the  agreement  is  filed. 

Mr.  Franklin.  The  agreement  is  filed. 

jVfr.  Hardy.  Until  that  is  disapproved,  if  it  is  the  orignal  agree- 
ment, possibly  it  ought  to  be  allowed  to  prevail;  a  reasonable  time 
ought  to  be  given  in  which  to  operate  without  approvah  But  if 
when  once  approved  a  subsequent  modification  or  correction  should 
not  be  made  without  first  obtaining  the  approval  of  this  board.  If 
they  could  change  them  instantaneously  from  day  to  day,  there  would 
1  e  no  use  of  the  board  supervising. 

Mr.  Franklin.  I  think  your  bill  provides  for  that,  because  it  says 
a  little  later  on,  some  place — I  do  not  know  where  it  is — ^that  if  the 
agreement  should  be  modified  or  altered,  those  modifications  have  to 
be  filed  at  once. 

Mr.  Hardy.  You  mean  before  they  go  into  effect  ? 

Mr.  Franklin.  Yes. 

Mr.  Saunders.  That  is  page  5,  line  15. 

Mr.  Franklin.  We  do  not  object  to  that  in  the  slightest.  These 
modifications  have  got  to  meet  with  the  approval  of  the  board.  All 
we  say  is  we  would  like  to  knoAv,  if  we  file  an  agreement,  whether  it 
meets  with  the  approval  or  disapproval  of  the  board  in  a  reasonable 
length  of  time. 

The  Chairman.  And  shall  continue  in  force  until  approved  or 
disapproved  by  the  board. 

Mr.  Franklin.  If  they  disapprove,  whatever  they  disapprove  of 
Avill  be  corrected,  and  then  we  will  not  be  protected  under  the  pro- 
visions of  the  act  of  Congress  of  July  2. 

Mr.  Byrnes.  What  page  are  you  referring  to  now  ? 

Mr.  Franklin.  I  am  referring  to  page  6. 

Mr.  Byrnes.  On  page  6  does  it  not  say  all  such  agreements,  ar- 
rangements, understandings,  and  conferences  shall  be  approved  or 
disapproved,  and  when  approved,  shall  be  excepted  from  the  pro- 
visions of  the  act? 


118  KEGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Franklin.  Yes;  but  what  I  am  getting  at  is  '•until  tliey  are 
approved."  They  might  be  approved  two  years  from  now,  or  some- 
thing of  that  sort.  Unless  they  disapi)rove  them,  automatically 
they  should  couie  under  the  exception. 

The  Chairman.  I  do  not  think  there  is  any  disagreement  be- 
tween us  about  that  matter,  and  if  you  will  suggest  some  appro- 
priate language  there,  we  will  consider  it. 

Mr.  Saundeus.  We  think  that  is  the  meaning  of  the  bill. 

Mr.  Franklin.  If  that  slight  modification  is  acceptable 

The  Chairman.  AVe  have  discussed  that  in  the  committee  since  the 
bill  was  introduced  and  have  it  under  consideration  now. 

Mr.  Franki^n.  We  would  like  to  know  where  we  stand  just  as 
quickly  as  possible. 

Mr.  Saunders.  In  other  words,  )^ou  Avould  like  something  like  this, 
if  I  catch  your  thought:  When  these  agreements  are  filed,  that  the 
same  shall  continue  operative  until  disapproved? 

Mr.  Franklin.  That  is  quite  right — as  operative  until  disap- 
proved they  shall  escape  from  the  act  of  Congress  of  July  2. 

Mr.  Hardy.  But  when  once  approved  shall  not  be  changed  then 
without  first  obtaining  the  approval  of  the  board? 

Mr.  Franklin.  That  is  right. 

Mr.  Hardy.  We  have  been  trying  to  get  that  in. 

Mr.  Franklin.  That  is  right. 

Mr.  Hardy.  That  is  what  I  started  to  say  was  our  purpose. 

Mr.  Franklin.  That  is  only  reasonable,  because  we  might  make 
some  alteration  that  would  entirely  change  the  whole  thing. 

Then,  Ave  feel  that  no  complaints  should  be  investigated  unless  by 
sworn  complaint  or  some  other  similar  form  of  protest.  The  traffic 
is  very  vohiminous;  you  are  dealing  with  a  great  many  different 
people.  As  regards  New  York,  for  the  sake  of  argument,  we  are 
dealing  with  practically  everybody  who  use  all  the  railroads  run- 
ning into  New  Y^ork.  Now,  if  j^ou  are  going  to  have  an  investiga- 
tion on  simply  somebody's  suspicion  that  something  is  being  done  or 
something  is  not  being  done — in  other  w^ords,  anything  that  is  of  suf- 
ficient importance  to  be  investigated  ought  to  be  of  sufficient  im- 
portance to  the  person  who  wants  the  investigation  to  make  a  sworn 
complaint. 

Mr.  8aunders.  In  other  w^ords,  in  line  10,  you  suggest  the  addition 
of  the  word  "  sworn  "  ? 

Ml'.  Frankein.  Sworn. 

Mr.  Byrnes.  You  also  want  to  strike  out  the  words  ''that  they  can 
make  the  investigation  u])on  their  own  initiative"? 

Mr.  Franklin.  Yes:  that  follows.  Now.  as  regards  the  rate- 
making  paragraphs,  I  think  they  are  4.  .5,  and  (i.  We  feel  that  the 
boai'd  should  have  no  genei-al  rate-making  ])ower;  that  the  condi- 
tions in  the  foreign  trade  are  such  that  if  this  ])ower  is  delegated  to 
them  it  Avill  be  luoi-e  disadvantageous  to  the  shii)pers  than  to  the 
steamers.  We  feel  that  the  board's  power  should  be  limited  to  ad- 
justing any  discrimination  between  shippers  or  any  injustice  to  the 
American  ship])ei'  versus  the  shipper  from  another  country  to  a 
similar  market:  that  the  board  should  not  have  any  general  i-ate- 
making  power. 

Ml-.  r>i;r(KM:i:.   \Vh\-  not.  Mi-.  Franklin? 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  119 

Mr.  P'kaxklix.  Because  the  coiulitioiis  surroundiiig  coniinerce  with 
the  foreign  countries  are  absolutely  different  from  those  covering 
the  railroads  or  any  other  trade  that  comes  solely  under  the  juris- 
diction of  any  one  government.  Your  merchants  in  this  country  are 
in  competition  with  the  merchants  of  the  world.  If  the  United 
States  puts  any  burdens  upon  its  shipping  that  other  countries  do 
not,  the  ships  will  not  come  to  the  United  States.  The  United  States 
has  not  sufficient  ships  to  carry  its  own  commerce  by  long  odds.  It 
nmst  attract  ships  from  all  over  the  world  and  from  the  connnerce  of 
the  world.  Xow,  if  you  make  a  maximum  rate  that  is  lower  than 
the  maximum  i-ates  from  other  countries,  the  ships  will  go  to  the 
other  countries.  The  very  fact  that  you  have  a  rate-governing  power 
will  drive  ships  from  your  trade.  Rates  in  the  foreign  trades  ebb 
and  flow  very  rapidly.  They  fluctuate  from  day  to  day.  They  are 
sometimes  increased  or  decreased  three  times  a  day. 

Mr.  Bhuckxer.  Are  they  uniform  throughout  the  worlds 

Mr.  P'kaxklix.  They  are  not  uniform  throughout  the  world,  be- 
cause they  depend  upon  various  conditions  in  every  direction.  But 
the  moment  rates  go  up  on  any  particular  commerce  the  ships  will 
Hock  there  until  the  rates  come  down.  Xow,  you  have  an  ever  present 
regulator  of  rates  in  the  tramp  and  other  steamers  that  can  be  readily 
moved ;  and  if  at  any  time  you  get  the  rates  too  high  as  compared 
with  the  world's  rates  you  are  bound  to  have  competition,  and  vice 
\ersa. 

Mr.  Saunders.  Just  in  that  connection  let  me  ask  you  a  question ; 
not  exactly  a  new  question,  but  it  formulates  the  same  thought  a  little 
differently.  You  suggest  difficulties  there  which  I  admit  are  ex- 
istent and  will  exist;  liit  tell  me  why  a  board  that  will  have  the 
capacity  to  determine  whether  a  rate  is  unjustly  discriminatory  or 
whether  it  operates  to  effect  an  unreasonable  prejudice  or  disad- 
vantage to  American  ports — it  is  a  question  of  judgment  determined 
upon  facts — tell  me  wh}'  a  board  having  the  capacity  to  do  that  and 
arrive  at  a  just  conclusion  in  that  respect — and  you  are  willing  for 
those  provisions  to  remain  in  the  bill — would  in  dealing  with  the 
factors  that  would  be  projected  into  a  determination  of  rates  be  un- 
able to  arrive  at  a  just  conclusion  and  determination  whether  or  not, 
as  a  matter  of  fact,  rates  were  unreasonably  high. 

Mr.  Franklin.  Because  the  conditions  are  absolutely  different,  in 
my  mind. 

Mr.  Saunders.  I  admit  that. 

Mr.  Franklin.  If  you  have  a  commission  and  put  before  that 
commission  the  facts  first  by  the  man  who  has  made  the  sworn  com- 
plaint and  then  by  the  steamship  lines  against  whom  the  complaint 
has  been  made,  you  have  the  various  facts  by  which  it  can  be  clearly 
demonstrated  whether  they  are  right  or  whether  they  are  wrong. 
The  commission  can  then  weigh  whether  or  not  there  has  been  a 
discrimination.  Now,  when  you  attempt  to  make  a  reasonable  rate, 
a  rate  that  might  be  reasonable  to-day  would  be  absolutely  unreason- 
able two  weeks  from  now,  and  if  made  as  a  reasonable  rate  to-day 
might  be  detrimental  to  the  shipper  two  weeks  from  now  more  than 
to  the  steamer,  because  the  steamer  would  not  be  protected  then  by 
that  rate  and  the  steamer  would  go  elsewhere  for  its  business.  If 
3^ou  were  like  the  railroads,  if  you  had  sufficient  capacity  to  carry  your 
whole  traffic  yourselves,  if  you  controlled  your  whole  traffic  yourselves, 


120  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

you  would  have  a  different  proposition.  But  you  are  competing  with 
the  merchants  of  the  world  and  your  merchants  are  competing  with 
the  other  merchants  for  the  ships. 

Mr.  Saunders.  Yes.  Now.  do  y<iu  not  think  if  you  were  on  that 
board  you  would  have  in  mind  all  of  those  facts? 

Mr.  Franklin.  Yes;  but  I  could  not  fix  a  reasonable  rate  for 
to-morrow\ 

Mr.  Saunders.  Let  us  see  about  that.  You  would  ha\e  in  mind 
all  these  facts.  If  3'ou  could  not  fix  a  reasonable  rate,  then  you  would 
not  operate  to  the  prejudice  of  any  one? 

Mr.  Franklin.  Then  why  let  a  board  feel  it  is  their  duty  to  at- 
tempt to  fix  rates?  That  is  exactly  the  reason  we  have  recommended 
to  3'ou  gentlemen  not  to  let  the  board  consider  they  have  the  power 
to  generally  fix  rates. 

Mr.  Saunders.  If  upon  the  state  of  facts  suggested  by  you  it 
proves  to  be  impossible,  you  say  it  can  not  be  done,  to  determine  if 
a  rate  is  unreasonably  high,  is  not  the  simple  conclusion  that  the 
board  would  not  undertake  the  determination?  Grappling  with 
the  facts  they  would  find :  Here  is  something  that  is  beyond  our 
powers  of  determination;  we  can  not  say  this  rate  is  unreasonably 
high,  owing  to  the  very  facts  that  you  mention? 

Mr.  Franklin.  Yes;  but  the  very  power  that  would  give  to  the 
board  is  what  we  are  afraid  of.  If  the  public  says  this  rate  is  un- 
reasonably high,  then  what  harm  is  it  doing  the  public?  The  public 
might  say,  "We  are  being  discriminated  against  in  competing  with 
some  other  market  of  the  country,  to  Avhich  we  want  to  send  our 
business."     Your  commission  will  then  see  if  it  is  a  discrimination. 

Mr.  Saunders,  You  are  afraid,  then,  this  board  will  undertake  to 
do  something  that  really  they  can  not  do?  In  other  words,  they 
will  undertake  to  declare  that  a  rate  is  unreasonably  high,  when  ns 
a  matter  of  fact  they  can  not  ascertain  whether  it  is  or  is  not  un- 
reasonably high? 

Mr.  Franklin.  That  is  right.  But  what  I  am  afraid  of  is  this: 
I  am  afraid  to  give  this  board  or  to  suggest  to  this  board  any  idea 
that  it  is  its  duty  to  make  rates.  That  is  what  I  am  trying  to  kee]> 
clear  from. 

The  Chairman,  That  is  what  we  tried  to  avoid  in  section  5.  We 
did  not  want  the  board  to  make  rates,  because  we  did  not  think  it 
practicable  for  the  board  to  make  rates.  Our  investigation  of  the 
so-called  shipping  trust  demonstrated  that  fact,  and  the  statements 
filed  with  the  committee  by  yourself  and  others  representing  the 
steamshi))  interests  were  verv  persuasive  on  that  question.  But  here 
in  February  we  had  this  situation :  An  American  manufacturer  of 
water  pipe  was  represented  by  the  president  of  the  company  at 
Buenos  Aires.  The  Argentine  Bepublic.  or  the  interests  there,  were 
asking  for  bids  on  28.000  tons  of  water  pipe.  The  pivsident  of  that 
companv  cables  his  representative  to  get  rates.  The  lowest  rate 
quoted  from  New  York  or  from  an  American  port  to  Buenos  Aires 
was  $30  a  ton.  The  rate  quoted  to  the  English  competitors  was  $11 
a  ton  less;  I  am  not  sure,  but  I  think  by  the  English  representatives 
of  the  same  line.  Now,  do  you  think  there  should  not  be  any  relief 
to  the  American  exporter  or  competitor  with  the  foreign  manu- 
facturer under  such  conditions  as  that? 


REGULATORY    FEATURES    OF    SHIPPING    BILL,  121 

Ml'.  Franklix.  You  siiy  in  one  case  that  they  were  quoted  at  $30 
and  in  another  case  quoted  at  $11 — from  England? 

The  CiiAiRMAX.  $11  a  ton  less. 

Mr.  Franklin.  Are  you  sure  your  facts  are  right? 

The  Chairman.  That  was  the  advice  we  got  from  the  representa- 
tive of  the  company — the  American  Cast  Iron  Pipe  Co. 

Mr.  Franklin,  t  doubt  very  much  wliether  Enghmd  would  export 
anything  like  that  quantit}^  at  this  time. 

The  Cilmrman.  We  have  the  correspondence  here  before  the  com- 
mittee, and  I  have  in  my  possession  statements  from  different  parts 
of  the  world  where  that  same  discrimination  has  been  going  on 
against  our  American  trade  in  favor  of  the  British  trade. 

Mr.  Franklin.  If  yoii  take  that  very  situation — the  steamers  going 
out  from  England  to  South  America  empty  and  for  a  return  cargo. 
They  will  carry  coal,  or  pipes,  or  they  will  carry  anything  else  they 
can  get.  Now,  the  ships  are  going  from  the  United  States  to  South 
America  with  full  cargoes.  The  trades  are  absolutely  different:  they 
are  net  comparable.  That  is  just  the  condition  that  j'ou  have  the 
world  over  in  the  various  trades.  It  is  exactly  the  same  situation  as 
you  have  seen  when  cement  and  other  commodities  were  brought 
from  the  Continent  to  the  United  States  at  two  or  three  dollars  a  ton. 
We  have  paid  for  ballast  coming  to  the  United  States.  We  are  pay- 
ing to-day  for  ballast  to  bring  ships  to  the  United  States  from  Eng- 
land. If  we  could  get  pipes  there  as  ballast  we  would  be  very  glad 
to  carry  them  for  a  smaller  rate.  It  is  a  condition  of  trade  that  will 
constantly  crop  up.  It  is  not  to  the  disadvantage  of  the  American  in 
any  equally  competitive  market. 

The  Chairman.  You  think  the  same  line  should  quote  a  differential 
in  favor  of  the  British  manufacturer  over  the  American  exporter,  for 
instance,  to  South  American  ports  and  at  the  same  time  be  permitted 
to  come  into  our  ports  and  trade  from  our  ports  and  continue  that 
discrimination  against  our  exporters,  do  you  ? 

Mr.  Franklin.  I  do  not  think  that  they  should  be  allowed  to  con- 
tinue any  discrimination.  The  matter  should  be  investigated  to  find 
out  whether  it  really  is  a  discrimination  or  not.  If  the  conditions 
are  absolutely  different,  those  conditions  must  be  considered;  but  if 
that  same  steamship  company  was  pursuing  that  policy  to  a  largely 
consuming  country,  thus  proving  discrimination,  I  would  say  no. 

The  Chairman.  We  want  to  meet  that  condition  in  some  reason- 
ruble  wa.y. 

Mr.  Franklin.  Yes. 

The  Chairman.  We  are  intending,  if  we  can,  to  help  our  export- 
ers; and  while  we  are  compelled  to  use  the  cleliA'ery  wagons  of  other 
nations,  we  do  not  want  them  to  discriminate  against  us.  There  is 
a  great  deal  said  about  they  won't  come  to  our  ports.  Their  ships 
would  rot  at  the  docks  if  they  did  not  come  to  our  ports.  They  have 
got  to  come  here  for  tonnage.  All  we  want  is  fair,  reasonable 
treatment. 

Mr.  Franklin.  They  will  come  here  for  tonnage,  but  the  moment 
they  can  make  a  little  more  out  of  their  steamers  elsewhere  they  will 
go  elsewhere. 

The  Chairman.  AVhere  have  they  the  tonnage  elsewhere? 

Mr.  Franklin.  In  normal  trade  conditions  the  tonnage  would  be 
too  large;   they  would  have  to  come  here.     But  that   would  level 


122  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

itself;  it  all  seeks  its  own  level:  it  is  a  (luestioii  of  supply  and  denuuul, 
and  it  seeks  its  own  level. 

The  CnAiiJ^L\N.  It  is  more  than  a  <)iiestion  of  supply  and  demand; 
it  is  a  (juestion  of  discriminaticm  which  we  want  to  j)revent. 

Mr.  FiJAXKi,ix.  As  far  as  disei-imination  is  concerned,  rludge,  we 
,>.re  not  at  all  opposed  to  this  board  having  a  lioht  to  adjust  anything 
that  they  find,  after  careful  investigation,  is  a  discrimination. 

The  C'haiu.max.  It  is  a  (juestion  of  combination,  too,  because  our 
investigation  showed  that  from  1909  to  1918  ocean  freight  rates 
increased  from  50  to  200  per  cent,  whereas  the  cost  of  operation  of 
the  shii)s  had  not  increased  appreciably  at  all;  and  it  also  developed 
that  the  combination  was  just  that  nuich  moi'e  effective.  Now,  we 
do  not  want  to  break  uj)  combinritions;  we  think  that  destructive  com- 
petition is  bad.  AVe  want  reasonable  regulation,  and  hence  we  pro- 
\ide  here  that  these  agreements  shall  be  submitted  to  the  connnis- 
sion,  and  if  approved,  or  if  they  should  continue  in  force  until  dis- 
itpproved.  to  permit  combination  in  certain  trades.  AVe  recognize 
there  are  certain  advantages  to  flow  from  it.  The  question  now  is, 
How  far  shall  we  go  in  the  matter  of  regulation?     That  is  all. 

Mr.  Greene.  He  stated  from  1909  to  1913. 

Mr.  FitAKKLiN'.  From  1909  to  1913  there  is  a  stated  cost  of  operat- 
ing. It  is  unlike  what  it  has  been  since  the  war.  lliere  w'as  a  stated 
cost,  but  now  things  are  absolutely  abnornuil.  AVe  felt  the  recommen- 
dation we  made  for  the  consideration  of  you  gentlemen,  that  this 
commission  or  boaid  should  have  the  power  to  adjust  all  discrimina- 
tions between  shippers  or  any  injustice  to  the  merchants  of  this  coun- 
try as  compared  with  the  merchants  in  the  other  countries,  after 
taking  everything  into  consideration 

The  Chairman.  That  will  have  our  best  consideration,  too. 

Mr.  Franklin  (continuing).  AA^e  felt  we  were  accomplishing  or  we 
hoped  in  our  recommendations  _you  would  accom|)lish  what  has  given 
3^ou  the  greatest  amount  of  anxiety,  and  that  is  fair  play.  Now 
you  will  get  fair  play :  that  board  can  absolutely  assure  themselves 
they  will  get  fair  play  and  they  will  take  into  consideration  all  the 
various  conditions  of  the  trades  of  the  w^orld. 

The  Chairman.  There  is  another  suggestion:  That  the  power  ol 
this  boaid  to  make  this  investigation  on  its  own  initiative  should  be 
stricken  out  of  the  bill.  I  am  not  inclined  to  favor  that  at  all,  be- 
cause we  received  hundi-eds  of  letters  from  large  shi])pers  who  en 
joyed  secrecy,  saying  if  they  should  disclose  their  complaint  it  woula 
mean  discrinjination.  And  hence  it  is  very  questionable  whether  this 
board  might  not  have  this  power  to  investigate. 

Mr.  Franklin.  Your  bill  certainly,  as  I  understand  it,  >Yould  cor- 
rect this,  as  supi)ose  a  shi})pei'  should  nud<:e  a  complaint  and  then  a 
steamship  company  should  do  anything  against  the  shipper  to  punish 
him  for  that  complaint.    That  is  coxered  by  your  bill. 

Mr.  Hardy.  There  is  a  lot  of  diU'erence  in  having  a  right  and 
having  to  depend  ui)on  it  for  your  protection. 

Mr.  Franklin.  Quite  a  difference;  but  I  think  that  is  too  picayun- 
ish  to  bother  much  about. 

Mr.  Hardy.  You  might  think  so.  but  I  know  in  my  own  little 
town  men  were  absolutely  afraid — they  were  in  the  mercantile  busi- 
ness— to  make  complaint  against  the  I'ailroad  for  fear  they  could  not 


KEGUl-ATOin     FEATURES    OF    SHIPPING    BILL.  128 

get  ship  space.  It  might  be  a  little  thing  in  some  places,  but  it  is  a 
big  thing  in  some  phices,  too. 

Mr.  Fkakklix.  If  he  made  r.  sworn  statement,  it  would  not  be 
necessary  to  have  it  published. 

Mr.  Hardy.  But  those  things  lealv  out.  You  can  not  get  a  caucus  of 
the  Democratic  Party  here  without  every  newspaper  knowing  every- 
thing about  it.    You  talk  about  things  not  leaking,  but  they  do. 

Mr.  Byknes.  What  is  your  objectioji  to  that  ])ower  being  lodged  in 
the  board? 

JSIr.  Franklin.  Tlie  power  of  conducting  it  ^ 

Mr.  Byrnes.  The  power  of  starting  an  investigation  upon  its  own 
initiative. 

Mr.  Franklin.  My  objections  to  that  are  not  exceedingly  strong, 
except  from  an  annoyance  point  of  \  iew . 

Mr.  Byrnes.  You  assume  the  sliii)j)ing  board  would  be  an  an- 
noyance to  you '. 

Mr.  Franklin.  No;  1  do  not  assume  the  ship])ing  board  would  be 
an  annoyance  to  us,  but  I  think  if  the  shipping  board  felt  they  had 
to  pay  attention  to  every  little  complaint  that  came  up  they  nnght 
call  upon  us  and  call  upon  others  more  frequently  and  not  put  their 
time  and  attention  u[)()n  the  more  imjiortant  cases.  1  think  it  is  a 
protetttion  to  the  shii)ping  board  as  well  as  to  the  steamship  o\\ner; 
that  is  my  opinion. 

Mr.  I>YRNEs.  That  is  true;  but  do  you  think  there  is  anything  in 
the  bill,  as  you  have  read  the  bill,  that  requires  the  shipping  board 
(a  board  composed  of  the  type  of  men  that  would  naturally  be  ap- 
pointed to  that  board)  to  i)ay  attention  to  every  little  rumor  about 
discriminations;  do  you  think  it  is  a  \alid  objection? 

Mr.  Franklin.  T  jnit  it  this  way  to  you;  I  do  not  think  it  is  an 
exceedingly  serious  objection,  but  1  think  it  would  simplify  matters 
and  make  the  whole  think  work  more  comfortably  and  pleasantly 
for  everybody,  and  accomplisli  the  desired  object  without  it. 

]Mr.  Hardy.  Let  me  give  you  a  situation  I  think  you  are  aware  of. 
In  the  administration  of  the  interstate-commerce  act,  my  under- 
standing is  sometimes  in  the  examination  of  one  case  the  commission 
ran  against  other  matters  and  they  had  no  power,  until  given  to 
them,  to  initiate  any  investigation  upon  their  own  responsibility. 
This  shipping  board  is  not  going  to  l)e  set  up  to  undertake  every  sort 
of  pessimistic  and  minimistic  investigation :  but  it  might  be  that  in 
an  investigation  they  Avould  run  across  other  questions  which  were 
very  serious  and  ought  to  be  investigated,  and  they  coidd  not  do 
it  unless  they  had  the  authority  to  start  an  investigation  upon  their 
own  initiative.  The  matter  of  the  nuisance  to  you  or  to  anybody 
else — I  think  that  objection  won't  amount  to  much. 

Mr.  Franklin.  T  will  tell  you.  Judge  Hardy,  Ave  only  suggest  that 
because  we  thought  it  Avould  simplify  matters.  As  far  as  the  steam- 
sliij)  business  is  concerned,  when  it  is  in  its  normal  condition,  it  is  a 
very  narroAV-margin  business.  That  is  the  reason  Americans  have 
not  gone  into  it;  there  was  not  profit  enough.  We  are  not  over- 
burdened Avith  officials;  Ave  have  few  officials,  and  Ave  do  not  Avant  all 
sorts  of  smaller  cases  coming  up.  In  other  words,  anybody  Avho  had 
an  important  case  would  not  hesitate  to  put  in  a  sAvorn  statement. 

Mr.  Hardy.  I  do  not  think  the  railroud  commission  has  ever  in- 
dulged in  that. 

Mr.  P'ranklin.  I  do  not  think  it  amounts  to  anvthin<r. 


1^4  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

The  Chairman.  I  do  not  think  there  is  any  (lisn<<:reement  between 
us  that  any  one  who  has  a  real  comphiint  shouhl  be  re(|nired  to 
submit  it  under  oath;  I  think  that  is  very  reasonable. 

Mr.  Franklin.  Then  for  this  section  5.  which  we  have  just  been 
discussing,  here  is  a  memorandum  prepared  by  Mr.  Kirlin.  T  think 
I  had  better  not  put  it  in  the  record,  because  I  think  Mr.  Kirlin  will 
discuss  it  when  he  comes  on. 

Mr.  Kirlin.  I  think  it  is  already  in.  T  think  Mr.  Bush  put  it  in 
with  his  remarks. 

Mr.  Franklin.  There  is  another  ({uestion — luiless  there  is  some 
further  information  you  would  like  to  have  from  me — about  this 
rate-making  power.  The  question  comes  up  about  the  tramp.  The 
rate-making  power  Mould  not  control  the  tramp  and  the  tramp 
is  always  there  and  is  always  a  competitor.  But  if  you  allow  the 
tramp  the  freedom  to  come  in  and  make  any  rate  against  your  regu- 
lar lines,  you  would  simply  weaken  your  regular  lines  and  your  regu- 
lar lines  are  the  carriers  for  the  merchants  who  are  doing  a  steady 
business  and  building  up  the  commerce  of  the  United  States. 

Mr.  Byrnes.  Mr.  Franklin,  let  me  ask  you  two  questions.  As  I 
understand  your  position  is  if  this  shipping  board  were  in  existence 
to-day  and  had  the  power  to  fix  a  maximum  rate  and,  exercising  that 
power,  fixed  a  rate  which  was  lower  than  the  shipowner  could  re- 
ceive in  other  countries,  that  be  would  withdraw  his  vessels  from 
the  American  trade  and  seek  the  more  profitable  business  elsewhere? 

Mr.  Franklin.  Quite  right. 

Mr.  Byrnes.  Is  that  your  position  ? 

Mr.  Franklin.  Yes, 

Mr.  Byrnes.  You  contend  it  would  not  be  necessary  for  the  ship- 
owner to  come  into  the  American  trade  in  order  to  secure  sufficient 
tonnage;  that  he  could  secure  it  elsewhere?     Is  that  your  position? 

Mr.  Franklin.  Quite  right. 

Mr.  Byrnes.  Then  you  do  not  believe  it  would  be  necessary  for 
him  to  come  here  to  secure  foodstuffs  to-day  to  carry  to  the  belliger- 
ent nations,  for  instance? 

Mr.  Franklin.  That  is  entirely  a  question  of  supply  and  demand. 
If  the  rate  from  the  United  States  was  fixed  at  a  lower  rate  than  that 
same  ship  could  get  from  Canada,  from  Argentine,  from  Australia, 
from  India,  or  from  any  other  Avheat-producing  and  exporting 
country,  the  ships  would  go  to  those  countries  first  and  you  would 
sell  your  wheat  after  those  fellows  had  sold  theirs.  My  contention  is 
that  it  would  be  more  detrimental  to  the  merchants  of  the  country 
than  to  the  steamer,  because  the  steamer  can  go  wherever  she  can 
make  the  greatest  amount  of  money. 

Mr.  Byrnes.  They  would  have  to  come  here  for  cotton,  though, 
would  they  not? 

Mr.  Franklin.  The  United  States,  of  course,  is  practically  the 
only  large  exporter  of  cotton  and  they  would  have  to  come  here  for 
cotton. 

Mr.  Byrnes.  That  is  all. 

Mr.  Saunders.  You  have  in  mind,  Mr.  Franklin,  in  answering  the 
questions  just  asked  by  Mr.  Byrnes,  rather  the  tramp  steamers  than 
the  established  lines? 


REGULATORY    FEATXJREvS    OF    SHIPPING    BILL.  125 

Mr.  P"kankli>c.  Oh.  yes;  because  the  regular  line  steamers  are  in 
many  cases  combination  steamers  and  rely  upon  other  classes  of  busi- 
ness, and  so  on;  but  they  are  not  the  great  burden  carriers. 

Mr.  Saunders.  I  understand.  I  was  simply  bringing  out  the  fact 
they  could  not  shift  about  in  the  manner  you  have  indicated;  but 
that  would  be  the  tramp  ^ 

Mr.  Franklin.  There  are  certain  ships  that  could  not  shift  at  all; 
they  were  built  for  the  American  market.  But  those  same  lines  have 
other  steamers  of  the  auxiliary  type  that  could  be  moved  and  they 
do  move  them  no^v;  they  go  to  the  cotton  markets;  they  go  to  the 
grain  markets,  or  they  take  a  cargo  of  be^ns,  or  anything  you  like, 
and  they  go  down  to  Argentine  and  elsewhere.  My  principal  conten- 
tion is  it  is  international  trade  over  which  you  have  no  control  and 
you  have  not  steamers  enough  to  handle  it  yourself. 

Mr.  Hardy.  Your  ])osition,  reduced  down,  is  simply  that  the  Ameri- 
can people,  as  a  whole,  have  no  power,  right,  or  capacity  to  prevent 
any  kind  of  excessive  rates? 

Mr.  Franklin.  No;  I  do  not  say  that.  I  say  that  they  have  the 
power  always. 

Mr.  Hardy.  But  it  would  be  foolish  to  exercise  it? 

ISIr.  Franklin.  I  say  it  would  not  be  to  their  interests  to  apply 
that  power. 

Mr.  Hardy.  That  is  what  I  mean. 

Mr.  Franklin.  I  think  it  would  be  to  their  disadvantage,  because 
their  commerce  is  never  charged  a  higher  rate  than  the  average  cur- 
rent rates  of  the  world,  if  you  analyze  it  at  the  time. 

Mr.  Hardy.  Suppose  you  found  they  were? 

Mr.  Franklin.  Then  they  Avould  adjust  themselves. 

]\Ir.  Hardy.  But  I  am  talking  about  whether  the  American  i)eople 
have  any  reasonable  right  and  power  to  regulate  their  rates  to  pre- 
vent thoroughly  excessive  charges? 

Mr.  Franklin.  They  have  the  power,  but  if  they  exercised  that 
power  and  they  put  a  maximum  rate  which  would  be 

]\Ir.  Hardy.  It  is  a  pity  they  have  the  power,  as  I  understand  your 
position — that  they  have  the  power  but  it  is  a  pity  to  use  it? 

Mr.  Franklin.  I  think  it  would  be  a  misfortune  from  a  commercial 
point  of  view  to  do  it. 

INIr.  Hadley.  Your  position  is  that  they  have  the  j^ower.  but  it  is 
not  expedient  to  exercise  it? 

jNIr.  Franklin,  I  think  at  the  moment  it  would  be  exceedingly  un- 
wise to  attempt  it. 

Mr.  Hardy.  Don't  you  think  not  at  the  moment,  but  always? 

Ml'.  Franklin.  T  think  in  the  future  it  Avould  be  detrimental  to 
commerce  to  apply  it. 

Mr.  Hardy.  But  what  you  think  now  would  be  unwise  would 
alwnys  be  umvise.  hereafter? 

Mr.  Franklin.  I  say  it  would  be  unwise  to  have  the  powder. 

jMr.  Hardy.  Then  it  is  unwise  to  have  the  power,  l)ecause  it  would 
be  a  misfortune  to  use  it  ? 

IVFr.  Greene.  How  is  it  about  the  running  expenses  of  a  foreign 
owned  and  foreign  built  vessel  as  compared  with  the  American  owned 
and  American  regulated  and  run  vessel? 

Mr.  Franklin.  Every  vessel  is  different,  and  the  conditions  are 
changing  so  rapidly  to-day.     We  already  have  put  in  effect,  or  at 


126  REfJUT.ATOKV    FEATURES    OF    SIIIPPTNO    BILL. 

least  we  did  yestei'day.  an  increase  of  wases.  which  will  result  in  the 
seamen  gettin<^  in  all  similar  ships  $45  plus  $10  instead  of  $27.50 
plus  $10,  which  is  an  inci-ease  in  tlie  last  five  weeks. 

Mr.  Grekne.  How  does  that  effect  the  foreign  shipper? 

JVIr.  Franklin.  The  foreign  shipowner? 

Mr.  Greene.  Yes. 

Mr.  Fraxkltx.  It  is  very  difficult  to  say  how  it  will  ultimately 
affect  the  foreign  shipowner.  Whether  the  foreign  slii])owner  will 
make  a  similar  inci-ease  or  not  during  the  wai*  is  an  unknown  prob- 
lem. 

Mr.  Greene.  But  \mder  normal  conditions? 

Mr.  Franklin.  Under  normal  conditions  his  Avages  will  be  very 
much  loAver  than  they  will  be  here. 

Mr.  Greene.  They  have  been  in  the  past? 

Mr.  Franklin.  They  always  have  been  in  the  past  and  there  is 
every  indication  that  they  will  be  in  the  future.  The  ships  which 
have  been  transferred  from  the  British  flag  and  other  flags  over  to 
the  American  flag  under  the  August.  1914.  act  have  averaged  five  to 
six  hundred  dollars  a  month  for  a  steamer  of  about  eight  or  ten 
thousand  tons  increased  wages  and  expenses. 

Mr.   Greene.  Over  what  they  were? 

Mr.  Franklin.  Over  what  they  were  under  their  own  flag. 

The  Chairman.  What  has  been  the  increase  in  the  ocean  freight 
rates  since  the  beginning  of  the  war? 

Mr.  Franklin.  They  have  been  very  heavy. 

The  Chairman.  From  500  to  1,000  per  cent? 

Mr.  Franklin.  No;  I  would  not  say  that.  I  have  never  worked  it 
out  from  a  per  cent  point  of  vieAv :  per  cent  is  very  misleading,  be- 
cau.se  the  rates  vary. 

The  Chairman.  There  has  been  an  enormous  increase  in  rates? 

Mr.  Franklin.  A  tremendous  increase  in  rates. 

The  Chairman.  And  it  is  now  for  the  first  time  the  seamen  have 
gotten  any  increase:  is  not  that  true? 

Mr.  Franklin.  No;  I  would  not  say  that.  The  seamen  have  got- 
ten a  larger  increase  now  than  they  have  ever  had  before. 

Mr.  RowE.  Tell  us  about  the  pay  of  seamen  for  two  weeks  or 
whatever  that  pay  is  under  the  seamen's  act. 

Mr.  Franklin.  Under  the  seamen's  bill  we  have  to  pay  the  seamen 
half  his  wages  the  moment  he  arrives  in  a  foreign  port,  which  he  im- 
mediately spends  in  liquor.  He  becomes  intoxicated  and  useless. 
There  is  no  argument  against  the  terriflic  advance  in  the  rates  of 
freight  and,  therefore,  that  the  steamei's  can  well  afl'urd  to  pay  the 
extra  wage  incident  to  being  transferred  to  a  freindly  flag. 

Mr.  Edmonds.  But  they  won't  continue  to  pay  it  after  the  war 
is  over? 

Mr.  Franklin.  It  is  very  difficult  after  a  higher  rate  of  wage  is 
paid  to  reduce  it;  whether  it  can  be  reduced  or  not  is  an  open  prob- 
lem. 

Mr.  Edmonds.  But  then  those  ships  will  go  back  to  foi-eign  reg- 
istry ? 

Mr.  Franklin.  The  ships  that  have  been  transferred,  when  they 
find  they  are  at  a  disadvantag,  will  very  promptly  transfer  back 
again;  the  question  will  be  whether  they  will  have  a  disadvantage 
or  not. 


EEGULATOEY   FEATURES   OF    SHIPPING   BILL.  127 

The  Chairmax.  I  suggest  that  we  liad  better  stick  to  this  bill. 
Proceed,  Mr.  Franklin. 

Mr.  Franklin.  I  think  the  balance  of  oiu'  suggestions  would  be 
much  more  ably  and  effectually  dealt  with  by  Mr.  Kirlin.  I  notice 
in  this  meuiojaudum  about  the  coastwise  business,  and  I  think  jMr. 
Dearborn  m  ill  cover  that — the  filing  of  rates  and  10  days'  notice  to 
change  them  I  think  is  objectionable  and  unfortunate. 

The  Chairman.  The  Interstate  Commerce  Commissiou  exercises 
that  right  now. 

Mr.  Franklin.  On  through  coastwise  traffic. 

The  Chairman,  Yes. 

Mr.  P^RANKi.TN.  I  think  we  ha\e  coxeied  this  feature  here 

Mr.  Hardy.  Wliat  sectif)ii  was  that  you  referred  to  last:  do  you 
reuiember '. 

Mr.  Franklin.  About  the  10  days? 

Mr.  Hardy.  Yes:  what  line  and  page  would  tliat  be? 

Mr.  Saunders.  Page  11.  line  18.     That  is  in  interstate  commerce. 

Mr.  Franklin.  Yes:  coastAvise. 

Mr.  Hardy.  I  undeistaud  souie  other  gentleman  will  s|)eak  more 
particularly  about  it? 

Mr.  Franklin.  On  i)age  7.  trans|K>rtation  of  ti-affic  under  sub- 
stantially similar  circumstances  and  conditions.  One  I'eason  we  felt 
that  the  other  paragraph  should  be  substituted 'is  that  if  you  had  a 
ship  at  the  last  minute  to  fill  up  that  might  give  serious  difficulty, 
and  it  would  be  a  very  great  disadvantage  to  commerce. 

Mr.  Saunders.  Do  I  understand  you  to  say  that  on  page  7  you 
want  that  to  be  stricken  out? 

Mr.  Franklin.  We  would  like  to  ha\e  that  entire  paragraph  elimi- 
nated. 

Mr.  Saunders.  The  whole  section  eliminated? 

Mr.  Franklin.  Yes;  that  section  4.  ^Ir.  Kirlin  will  give  you  our 
recommendation  for  a  substitute  for  this. 

Mr.  Hadley.  He  mentions  those  tw^o  lines  as  objectionable. 

Mr.  Saunders.  I  was  just  asking  him  if  T  understood  he  w^anted 
those  lines  stricken  out.  because  the  very  thing  you  suggested  a  mo- 
ment ago,  with  reference  to  a  shij)  loading  at  the  last  moment,  was 
brought  out  by  some  questions  asked  by  Mr.  Edmonds  a  few  days 
ago.  We  argued  it  at  that  time  and  we  concluded  those  lines  were 
necessary  in  order  to  take  care  of  the  conditions  you  name  so  as  to 
enable  a  distinction  to  be  made  which,  if  it  could  not  be  made,  would 
create  hardships. 

Mr.  Franklin.  Under  substantially  similar  circumstances  and 
cimditions.  We  wei"e  anxious  to  find  out  exactly  what  you  had  in 
mind. 

Mr.  Saunders.  Yes. 

Mr.  Franklin.  As  you  put  it  to  me  it  is  all  right. 

Mr.  Saunders.  That  is  to  cover  the  very  situation  you  suggest. 

Mr.  Franklin.  As  you  put  it  it  is  all  right.  We  were  afraid,  in 
reading  that  over,  that  we  might  not  have  a  right  to  do  that. 

Mr.  Saunders.  No;  we  had  in  mind  that  would  enable  vou  to  do 
that. 

Ml'.  Franklin,  If  you  had  that  in  mind  and  that  is  clear,  that  is 
quite  satisfactoiy  to  us.  because  that  is  an  essential  feature  of  the 
business. 


128  KEGULATORY    FEATURES    OF    SHIPPING    BILL. 

The  Chairman.  We  recognize  that  fully. 

Mr.  Fkanklix.  We  only  wanted  an  explanation  on  it,  and  I  hope 
you  Avill  give  careful  (consideration  to  our  substitute  for  that  para- 
graph as  a  whole. 

STATEMENT  OF  MR.  J.  PARKER  KIRLIN,  LAWYER,  OF  NEW  YORK 
CITY,  ENGAGED  IN  THE  PRACTICE  OF  ADMIRALTY  AND  MARI- 
TIME LAW. 

Mr.  KiHLiN.  Mr.  Chairman  and  gentlemen  of  the  couunittee,  my 
functions  as  a  member  of  this  subcommittee  of  the  chamber  of  com- 
merce have  been  to  advise  them  in  so  far  as  their  deliberations  have 
carried  them  into  the  realm  of  admiralty  and  maritime  law,  where 
my  practice  chiefly  lies. 

We  have  alread}'  expressed  to  you  at  the  previous  hearing  the 
views  of  our  committee  about  your  priucipal  project,  House  bill 
10500.  We  have  understood  that  the  present  hearing  in  relation  to 
House  bill  14337  is  with  the  view  of  getting  an  open  discussion  as 
to  the  provisions  of  that  bill  so  that  your  committee  would  be  in  a 
position  to  make  use  of  such  parts  of  it  as  it  may  think  desirable  to 
include  in  H.  R.  10500  in  place  of  sections  0  and  10  of  that  bill. 

The  Chairman.  Yes;  we  had  that  under  consideration. 

INIr.  KiRLiN.  Of  course  H.  R.  14337  is  a  little  broader  than  sections 
9  and  10  of  the  original  project.  While  we  are  still  of  the  same 
opinion  with  regard  to  the  general  policy  of  regulation,  and  think  it 
inadvisable  and  unnecessary  to  provide  such  stringent  and  minute 
regulations  as  are  covered  by  sections  9  and  10.  and  think  of  IT.  R. 
10500  that  it  would  be  very  much  better  to  embody  a  shorter  and 
more  general  provision  prohibiting  discriminations,  unfair  i)ractices, 
and  unfair  competition,  the  chamber  of  commerce  has  been  desirous 
of  meeting  the  wishes  of  this  committee  b}'  expressing  their  views 
after  studying  this  bill.  It  has  formed  some  views  about  H.  R.  14337 
and  sent  its  committee  down  here  to  give  you  the  benefit  of  them  for 
what  they  may  be  worth. 

My  own  part  in  this  discussion  is  chiefly  in  relation  to  the  textual 
aspects  of  the  bill. 

I  ma}^  say  at  the  outset  that  nobody  on  our  connnittee  has  the 
slightest  doubt  as  to  the  complete  power  of  (^ongress  over  the  gen- 
eral sul)ject.  It  hiis  the  absolute  right  to  nudce  the  most  minute  and 
drastic  regulations  that  it  pleases  on  the  subject.  Such  regulations 
would  apply  not  only  to  American  shipping  generality  but  also  to  all 
foreign  shipping  within  our  ports.  You  do  touch  at  one  or  two  points 
in  this  bill,  hoAvever,  upon  a  very  delicate  question  of  power  in  those 
provisions  where  yon  deal  with  the  actions  of  cari'iers  abroad.  To  be 
specific  about  it.  there  is  a  suggestion  in  the  lull  that  a  carrier  trading 
from  Brazil  to  New  York  ought  not  to  be  a  ]:)arty  to  any  rebate  sys- 
tem at  the  other  end  of  the  voyage.  Foi-eign  commerce  has  two  ends. 
While  the  incoming  commerce  from  Brazil  is  a  i)art  of  our  commerce, 
it  is  also  a  part  of  the  export  trade  of  Brazil,  and  primarily,  I  should 
say,  it  would  be  within  the  ]iower  and  authority  of  the  Government 
of  Brazil,  or  ought  to  be  within  their  power  and  authority,  to  de- 
termine what  trade  methods  should  be  permitted  there.  It  seems  to 
me  that  it  is  to  a  certain  extent  presumptuous  for  a  nation  to  assume 
an  authority  over  international  trade  which  would  lead  to  the  pro- 


EEGULATOEY    FEATURES    OF    SHIPPING    BILL.  129 

jection  of  its  regulations  into  the  sovereign  territory  and  into  the 
scope  of  authority  of  a  foreign  government. 

Xow.  while  we  entertain  no  doubt  about  the  authority  of  Congress 
to  make  these  regulations,  we  think  that  the  circumstances  under 
which  we  find  ourselves  at  present,  and  so  far  as  w^e  can  see,  are 
likely  to  find  ourselves  upon  the  conclusion  of  peace,  are  not  such  as 
really  call  for  such  specific,  detailed,  and  extensive  regulations.  I 
hear  a  great  deal  in  the  ordinary  course  of  business  about  legislation 
in  relation  to  the  shipping  trade.  I  hear  it  from  importers,  shippers, 
consignees,  shipping  agents,  shipowners,  from  persons  w^ho  are  de- 
sirous of  investing  in  shipping  property,  and  from  banks  which 
would  like  to  market  the  securities  that  might,  with  a  very  little 
legislation,  be  made  xevy  attractive  for  investment.  The  consensus 
of  opinion  that  I  hear- — and  I  do  not  speak  alone  of  New  York,  be- 
cause my  business  takes  me  into  other  regions  along  the  seacoast  and 
the  Gulf— is  that  any  regulation  that  is  put  on  shipping  at  the 
present  time  is  going  to  react  against  shippers. 

I  do  not  believe  the  steamship  people  are  so  very  much  concerned 
nbout  this  bill.  While  there  are  a  few  ships  that  are  so  constructed 
and  specially  designed  for  their  trades  that  they  can  not  engage  in 
any  other,  they  are  negligible  in  quantity  and  in  the  amount  of 
tonnage  in  determining  a  matter  of  national  policy.  The  great  mass 
of  the  tonnage  w^ould  stay  or  go  where  the  business  was  most  at- 
tractive. 

The  Chairman.  As  a  practical  proposition,  where  would  that  be? 

Mr.  KiRLiN.  Where  they  could  make  the  most  money. 

The  Chairman.  What  country  furnishes  more  tonnage  than  this 
country  ? 

Mr.  KiRLiN.  I  do  not  know  that  any  country  furnishes  more  cargo 
tonnage  than  this  country,  but  there  is  a  great  deal  of  choice  of 
cargoes  in  this  country,  and  of  course  the  exports  from  Argentina 
and  other  parts  of  South  America  are  growing,  the  exports  from 
Russia  are  grooving,  and  those  from  the  Far  East  are  growing.  The 
combined  commerce  of  the  world  is  certainly  larger  than  the  export 
trade  of  the  United  States.  The  export  trade  of  the  United  States 
is  diminishing  so  far  as  the  great  staple  products  are  concerned, 
although  there  has  been  a  general  increase  in  the  export  of  manu- 
factured products.  The  idea  of  shippers,  as  well  as  of  shipowners, 
is  that  if  you  put  any  clog  on  the  shipping  trade  that  is  unnecessary, 
but  nevertheless  constitutes  in  however  small  a  degree  a  burden,  it 
is  just  adding  that  much  to  the  fixed  charges  of  the  business. 

I  do  not  believe  a^ou  appreciate  how  much  work  some  of  the  pro- 
visions of  this  bill  would  put  upon  the  carriers  in  the  way  of  keep- 
ing their  accounts  rates  and  records  in  such  a  manner  as  to  be 
able  to  present  them  immediately  as  required  here,  or  the  expenditure 
that  would  be  involved  in  answering  every  charge  that  came  along 
from  a  shipper,  or  in  meeting  an  investigation  which  the  board,  on 
its  own  initiative,  might  think  it  desirable  to  institute.  These  all 
involve  expense.  Now  it  is  not  to  be  supposed  that  the  shipowners 
are  going  to  pay  those  expenses  out  of  their  own  pockets  unless  they 
haA'e  to.  Those  expenses  are  coming  out  of  the  freight;  they  are 
going  to  be  added  onto  the  freight,  and  wdioever  pays  the  freight 
has  got  to  carry  the  added  burden  arising  from  the  regidations.    Of 

38534—16 9 


130  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

course  I  agree  that  if  regulation  is  necessary  it  ought  to  exist,  no 
matter  who  has  to  pay  for  it.  But  if  it  is  not  necessary  is  it  not 
^viser  not  to  incur  or  achl  that  extra  burtlen  to  the  trade?  That  is 
the  feeling  that  has  animated  us  in  going  through  this  bill. 

I  may  say  a  woid  or  two  more  about  the  n(;cessity  for  regulation. 
It  has  been  suggested  in  the  discussion  here  this  morning  that  a  prior 
investigation  of  this  committee  showed  the  existence  of  vast  combina- 
tions of  shipowners  which  controlled  the  trades  of  the  world  and 
fixed  the  rates  of  freight  for  the  world.  But  the  fact  must  not  be  lost 
sight  of  that  those  couibinations.  as  large  as  they  were,  were  very  suuill 
in  comparison  with  the  whole  carrying  capacity  of  the  steauishii)s  of 
the  world.  The  steamsliips  that  were  in  those  combinations,  taking 
them  all  together,  were  i)robab]y  less  than  a  third  of  the  tonnage  of 
the  world  that  is  engaged  in  carrying  cargoes,  and  a  considerable 
number  of  those  that  were  in  the  combination  were  passenger  steam- 
ers. If  you  eliminate  the  passenger  steauiers  from  those  that  were 
engaged  in  combinations  the  percentage  would  be  very  much  lower. 
The  unrestricted  tramp  tonnage,  whose  capa.city  avsis  certainly  two- 
thirds  of  the  tonnage  of  tlie  world,  was  running  free,  seeking  the  best 
freight,  going  where  it  could  make  the  most  money,  and  constituting 
the  most  practicable  and  effective  rate  regulator  that  the  experience 
of  the  world  has  ever  devised.  Why  should  this  Nation,  which  is 
just  embarking  on  a  nuiritime  policy,  depart  in  its  legislation  from 
the  universal  experience  of  maritime  nations  of  the  world  b}''  em- 
barking upon  an  experiment  in  regulation  which  is  bound  to  involve  a 
certain  amount  of  friction,  expense,  and  uncertainty,  unless  it  is  made 
manifest  that  there  is  a  practical  necessity  for  it?  Itseemstothe  pub- 
lic and  to  those  who  are  uiost  intimately  conuected  with  the  business 
that  the  notion  that  regulation  is  reduired  is  more  synthetic  than  eui- 
pirical.  The  business,  in  times  of  peace,  has  got  along  satisfactorily 
to  ever3'bod3''  without  it.  There  were,  it  is  true,  advances  in  freight 
rates,  as  the  chairman  ])ointed  out,  from  1909  to  1912;  but  those  had 
been  preceded  by  })eriods  of  great  depression,  so  that  taking  the 
average  froui  1900  to  1912,  I  do  not  think  anybody  ■^^()uld  contend 
that  shi])ping  had  made  any  undue  profits. 

The  Chaiioian.  I  think  this,  Mr.  Kirlin.  if  you  will  pardon  me 
for  interrupting  you  there:  From  1900,  for  several  years,  there  was 
active  competition  in  the  ocean-carrying  trade,  which  depressed  the 
ocean  freight  rates,  and  the  earning  were  not  large.  Beginning 
about  1909,  these  combinations  became  effective.  After  that  competi- 
tion was  eliminated  and  the  rates  increased.  Xow.  in  this  bill  we  do 
not  try  to  break  u\)  any  legitiuiate  couibination,  because  we  recognize 
that  there  are  certain  good  features  iu  these  agreements  and  coirfer- 
ences  under  which  these  line  are  regulated.  But  the  ocean  freight 
rates  increased,  I  say  from  50  to  200  per  cent  without  any  appi-ecia- 
l)le  increase  in  the  cost  of  operation.  1  could  show  you  the  statement 
of  the  Hamburg-American  Line  for  the  fiscal  year,  as  I  recall,  ending 
December  31,  1913,  showing  phenomenal  profits  for  that  year. 

Mr.  KiKLiN.  I  saw  it.    They  set  aside  -1.000,000  marks  for  fighting. 

The  CiLMRMAN.  Yes,  and  they  built  up  their  business  each  year  and 
l)aid  a  large  dividend,  put  aside  a  large  auiouut  of  money  for  surj^lus, 
and  contributed  to  the  fund  foi-  fighting  ships  besides. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  131 

Mv.  KiKLix.  But,  ]Mi'.  Chairmcin,  the  illustration  of  a  single  line 
like  that,  which  is  built  especially  as  a  facility  for  a  certain  port,  is 
not  very  helpful. 

The  C'liAiioiAX.  But  that  was  true  of  all  these  lines. 

Mr,  KiRLixN'.  In  forming  an  opinion  al)out  the  Avide-open  ti-ade  of 
the  world 

The  CiiAiKMAN.  It  would  be  true  of  the  International  Mercantile 
Marine  if  it  had  been  capitalized  on  costs  and  not  on  a  highly  in- 
flated valuation. 

ISIr,  KiRLix.  It  is  very  important  in  these  matters  to  get  the  facts 
right.  I  think,  with  all  deference,  Mr.  Chairman,  you  are  not  quite 
right  in  saying  that  the  advance  from  1909  to  1912  was  due  to  the 
absence  of  competition. 

The  CiiAiKMAN,  I  would  not  say  it  was  wholly  so,  no. 

Mr.  KiRLix.  Before  that  the  rates  were  down  on  account  of  com- 
petition. The  rates  were  down  on  account  of  competition  from  1900 
to  1909,  and  they  were  also  down  because  the  quantity  of  exports  was 
dovrn.  They  were  up  from  1909  to  1912  because  the  quantity  of  ex- 
ports was  away  up.  If  the  advance  in  freight  rates  had  been  ab- 
normal in  comparison  with  the  increase  of  exports,  the  great  mass 
of  the  tramp  tonnage  of  the  Avorld  woidd  have  been  knocking  at  our 
doois  for  freight  at  rates  v\'hich  were  less  than  the  advance  that 
naturally  developed  during  that  period. 

The  Chairman.  Oh,  that  did  not  apply  simply  to  tracle  to  and 
from  our  ports,  but  the  world  over;  wherever  the  combinations  were 
effective,  these  increases  occurred. 

IMr.  KiRLiN.  They  occurred  everywhere;  not  only  where  the  com- 
binations were  effective,  but  also  on  sugar  from  Java,  or  coal  from 
Cardiff,  or  grain  from  the  Argentine;  they  occurred  in  every  place 
where  the  great  staples  of  the  world  were  moving  in  tramps,  and  the 
freights  that  were  paid  on  those  staples  in  the  great  trades  fixed  the 
mai-kets  for  the  freights  of  the  world.  The  steamers  that  came  into 
these  lines  operating  in  combination  got  the  same  comparative  rates 
and  no  higher  rates  than  those  that  were  fixed  by  the  tramps.  So 
that  while  the  advance  of  rates  was  coincident  with  the  higher  de- 
velopuient  of  combinations  it  is  a  non  sequitur  to  say  that  the  ad- 
vance was  due  to  more  effective  combinations  as  a  cause;  since  you 
had  at  the  same  time  the  corrective  effect  of  the  great  commerce  of 
the  tramps  which  mo^ed  the  staple  products  and  fixed  the  rates  not 
only  for  themselves  but  also  for  those  steamers  operating  in  the  com- 
binations. 

]Mr.  Hardy.  I  have  no  doubt  you  read  the  testimony  before  us  in 
that  investigation. 

Mv.  KiRLix.  I  heard  most  of  it. 

Mr.  Hardy.  Now  it  was  very  clearly  demonstrated  to  us  that  those 
ship  lines  had  their  railroacl  connections  which  gave  them  their 
freight  in  preference,  or  by  agreement,  and  that  the  tramp  coming 
into  New  York  did  not  have  much  opportunity  to  get  desirable 
freight,  high-priced  freight:  they  got  what  was  left,  the  great  bulk 
tonnage,  and  carried  that.  And  these  ship  lines,  through  their  agree- 
ments with  the  railroads,  carried  the  cream  of  the  freight  from  this 
country  and  to  this  country.    Was  not  that  your  recollection  of  it? 

Mr.  KiRLiN.  No:  I  can  not  say  it  goes  quite  to  that  length.  I  think 
there  has  been  no  arrangement  between  the  railroads  and  the  foreign 


132  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

steamship  lines  in  Xew  York  for  a  good  many  years,  such  as  you 
speak  of. 

Mr.  Haiidy.  We  have  their  agreements  in  writing  as  a  part  of  those 
hearings  with  nearly  every  railroad  line  in  the  United  States. 

Mr.  KiRLix.  T  defer  to  your  superior  knowledge  about  that. 

Mr.  Hardy.  That  is  my  recollection. 

Mr.  KiRLix.  I  personally  know  of  no  agreement  with  any  railroad 
on  the  jiart  of  any  steamship  line  that  has  been  in  force  for  the  last 
six  or  eight  years ■ 

Mr.  Hardy.  I  will  have  to  refer  you  to  the  page  of  those  hearings 
Avhere  that  is  to  be  found. 

Mr.  KiRLix  (continuing).  Other  than  this,  that  where  lines  are 
running  with  comparative  regularity,  that  is.  where  they  are  estab- 
lished, they  do  allow  the  railroads  to  issue  through  bills  of  lading  and 
take  those  up  at  the  seaboard  as  they  come  along. 

Mr.  Hardt.  Don't  you  recall  the  agreements  between  the  railroads 
entering  at  Mobile  Avith  the  ship  lines  that  went  out  from  there— 
their  preferential  agreements  Avith  them!' 

Mr.  KiRLix.  I  was  thinking  more  of  Xew  -York.  I  do  remember 
that  there  Aras— 

Mr.  Hardy.  Xew  York  did  not  have  those  agreements:  Xew  York 
and  Xew  Orleans,  I  believe,  were  free  from  them. 

Mr.  KiRLix.  I  do  remember  that  there  was  an  understanding  in 
Mobile. 

Mr.  Hardy.  And  every  other  city,  except  Xew  York  City  and  one 
other,  had  those  agreements.    Xew  York  did  not. 

The  CiiAiRMAx.  I  would  like  to  suggest  that  we  would  get  more 
accurate  information  if  you  read  chapter  9.  volume  4.  of  the  "In- 
vestigation of  shipping  combinations"  under  House  resolution  587, 
entitled  "  Traffic  agreements  between  American  railroads  and  foreign 
steamship  lines."  I  think  that  would  be  illuminating  to  those  who 
are  not  informed.  And  the  accuracy  of  those  statements  has  never 
been  questioned  by  any  source,  as  far  as  I  know. 

Mr,  KiRLix.  I  was  only  speaking  about  matters  that  I  know  of  at 
home.  And  Judge  Hardy  now  confirms  my  recollection  that  there 
were  no  such  arrangements  in  Xew  York.  So  that  the  result  was  that 
during  all  that  time  there  was  an  absolutelv  open  field  in  Xew  York, 
the  greatest  exporting  point,  for  tramps  to  get  everything  that  was 
shipped  from  that  port  and  to  regulate  the  rates  for  the  lines.  If 
the  lines  were  charging  an  undue  rate  it  was  perfectly  open  for  any 
half  dozen  of  those  tramp  owners  to  get  together  and  form  their 
own  line. 

Mr,  Hardy,  Along  that  line,  I  will  just  read  what  the  committee 
had  to  say: 

All  exfojit  7  of  the  IS.")  railway  conipanics  to  whom  this  iiuniiry  was  directed 
complied  with  the  committee's  request.  These  replies  show  that  New  York.  New 
Orleans,  and  Galveston  are  apparently  "open  ports,"  all  of  the  railroads  lead- 
ing thereto  having  answered  all  the  divisions  of  the  ahove-mentioned  inquiry 
in  the  negative. 

The  other  cities  of  our  seacoast  were  in  the  combination. 

Mr.  KiRLix.  I  do  not  want  to  press  our  views  unduly  about  this, 
l)ut  merely  to  outline  what  they  are. 

The  CiiATRMAx.  I  will  agree  not  to  ask  another  question,  because  I 
would  like  to  have  3'ou  present  your  views  without  interruption. 


REGULATOBY   FEATURES   OF    SHIPPING   BILL.  133 

Mr.  KiRLiN.  I  like  to  ans^Ye^  questions,  because  it  enables  me  to 
illumiiuite  matters,  perhaps,  that  are  in  the  miuels  of  the  members. 
It  does  not  disturb  me  at  all. 

Mr.  Hardy.  I  accept  the  chairman's  suggestion  on  that. 

Mr.  KiRLiN.  Passing  to  the  textual  criticisms,  for  convenience  we 
have  handed  in,  in  Mr.  Bush's  statement,  a  detailed  list  of  the  exact 
amendments  that  have  been  proposed.  It  Avon't  help  matters  at  alJ 
for  me  to  go  through  those  in  detail  now,  because  you  will  have  them 
in  the  record.  I  only  Avant  to  refer  to  a  few  of  the  more  important 
of  them. 

I  find,  beginning  at  the  very  first  mention  of  any  penalty  in  the 
act,  what  seems  to  me  undue  severity  all  through  this  act  in  regard 
to  penalties.  The  violations  of  this  act  are  not  going  to  involve  any- 
body in  very  serious  trouble  or  financial  loss,  and  they  are  easily 
susceptible  of  remedy.  Is  it  not,  therefore,  unreasonable  to  provide 
anything  in  the  bill  which  has  a  tendency  to  scare  off  those  a^ou  want 
to  have  go  into  the  Imsiness.  It  is  true,  as  one  of  your  members 
has  said,  that  the  bill  is  made  for  the  other  fellow,  but  these  bills 
are  not  ahvays  as  plain  to  commercial  people  as  they  seem  to  be  to 
you.  I  have  had  many  a  client  spend  hours  in  my  office  to  deter- 
mine whether  some  arrangement  he  was  engaged  in  was  contrary  to 
the  provisions  of  the  Sherman  Act.  Any  lawyer  that  ever  had  oc- 
casion to  advise  on  that  act  knows  that  for  one  period  of  10  or  15 
years  one  line  of  advice  was  right,  and  after  that  another  line  of 
advice  was  right.  Where  you  are  dealing  with  statutes  that  are 
framed  in  general  terms  so  that  even  well-intentioned  merchants  or 
well-intentioned  lawyers  have  difficulty,  or  may  see  that  they  will 
have  difficulty,  in  determining  wdiether  a  certain  course  of  conduct 
is  within  the  law  or  not,  what  is  the  sense  of  providing  that  a  man 
shall  be  subject  to  a  penalty  of  $25,000  for  each  offense  against 
the  act? 

Mr.  Byrnes.  That  is  on  page  4? 

Mr.  KiRLiN.  Yes;  line  5.  No  jury  would  ever  think  of  convicting 
a  man  for  an  offense  against  the  act  if  the  punishment  was  to  be  a 
fine  of  $25,000. 

Mr.  Byrnes.  Does  it  not  say,  "  not  more  than  $25,000  "  ? 

Mr.  KiRLiN.  Yes ;  not  more  than  $25,000.  But  further  down,  in  line 
11,  it  does  not  even  say  "  not  more  than  " ;  it  provides  that  a  penalty 
of  $25,000  shall  be  imposed.  I  suppose  that  is  an  oversight  in 
line  14. 

Mr.  Saunders.  No  ;  that  is  not  an  oversight.  Let  me  suggest  that 
is  a  case  of  contempt  of  the  court  order;  and  do  you  think  a  vessel 
in  contempt  of  a  proper  order  should  not  be  fined  more  heavily  than 
the  other  fellow? 

Mr.  KiRLiN.  It  is  not  only  a  court  order ;  it  is  also  a  board  order. 

Mr.  Saunders.  I  should  have  said  "  board  order."  It  would  have 
the  effect  of  an  order  of  the  court. 

Mr.  KiKLiN.  It  is  made  for  a  board  order. 

Mr.  Saunders.  I  say  it  is  an  order  that  has  the  effect  of  a  court 
order. 

Mr.  KiRLiN.  But  boards  may  make  mistakes;  even  courts  make 
mistakes.  The  ship  may  find  herself  in  a  position  where  she  must 
leave  port;  the  act  proposes  to  refuse  clearance.     What  is  the  ship 


134  REGULATORY   FEATURES   OF   SHIPPING   BILL. 

going  to  do^  She  has  a  cargo  of  merchandise  on  board  for  delivery 
in  foreign  ports.  Is  she  going  to  lie  still  in  port  and  allow  the  cargo 
to  rot  because  the  board  says  her  owners  have  violated  some  provi- 
sion of  the  act?  If  the  ship  owner  linds  himself  in  circumstances 
where  he  has  to  move  the  ship  has  he  got  to  pa}'  $25,000  for  doing  it? 
The  board  has  the  poAver  to  punish  for  contempt;  it  does  not  need 
any  such  drastic  regulation  as  this.  It  is  a  deterrent  thing  that  is 
imnecessary  in  the  bill,  and  therefore  seems  to  me  impolitic. 

Mr.  Saundkrs.  Then,  you  would  not  have  any  authority  to  punish 
for  contempt '( 

Mr.  KiKLix.  The  court  has  general  power  to  punish  for  contempt. 
But  the  court  would  have  no  jurisdiction  to  impose  any  less  fine  than 
$25,000  if  it  fou!id  at  the  cud  of  a  trial  that  a  man  had  made  a 
mistake. 

Mr.  Sauxders.  The  board,  you  observe  in  that  connection,  does 
not  impose  any  penalty;  the  law  saj^s  a  ship  which  shall  defiantly 
break  a  proper  order  that  had  been  entered  after  a  proper  hearing 
shall  be  subject  to  this  fine. 

Mr.  KirLiN.  It  says  an  order  of  the  board  or  of  the  court. 

Mr.  Saunders.  Either  one  or  the  other. 

Mr.  KiRLix.  Yes. 

Mr.  Saun'ders.  But  this  relates  to  a  hearing,  and  the  ship  in  de- 
fiance of  the  order  of  a  properly  constituted  tribunal,  either  clears  or 
comes  in.  And  as  suggested  on  my  left  here,  there  is  an  appeal  from 
that  order.  Do  you  tliink  it  ought  to  be  treated  as  a  negligible  thing 
for  a  ship  to  disregard  a  proper  order  after  there  had  been  due  pro- 
ceedings ? 

]\f r.  KiRLiN.  No :  I  do  not  think  that  at  all :  but  I  think  the  board 
might  very  easily  make  a  mistake.  Of  course,  one  maj'  appeal,  but 
yon  could  not  expect  a  ship  to  lie  in  the  harbor  with  a  cargo  of  fruit 
and  allow  it  to  rot. 

Mr.  Saunders.  What  would  you  suggest? 

Mr.  KiRLiN.  I  would  say  "  not  more  than."  That  would  leave  a 
latitude  to  make  the  penalty  fit  the  crime. 

The  CiiAiR^MAN.  That  can  easily  be  modified. 

Mr.  Hardy.  Yes.  While  Ave  Avere  discussing  that  several  members 
of  the  committee  suggested  there  might  be  cases,  for  instance,  a  ship 
might  be  in  distress  outside  of  a  port  and  it  Avould  violate  a  decree; 
and  there  might  be  some  exceptions,  too. 

Mr.  KiRLTN.  Yes. 

Mr.  Saunders.  But  you  notice  that  Avould  have  to  be  a  fixed  pen- 
alty in  that  case;  it  can  not  be  flexible  like  the  other.  That  has  got 
to  be  fixed,  because  it  is  assessed  upon  a  vessel  that  has  violated  an 
order  and  a  recovery  is  to  be  had  by  proceedings  in  court,  and  it  could 
not  be  flexible. 

Mr.  KiRi.iN.  You  lune  llexible  i)nnislimonts  for  other  things — 
robber}'  and  other  crimes. 

Mr.  Saunders.  Certainly.  But  let  us  take  that  case  and  follow  it 
out.  Suppose  you  say  a  penally  of  "  not  more  than  $25,000  "  shall 
be  recoA'ered;  hoAv  Avould  you  ])roceed  to  recover  it?  When  you  pro- 
ceed to  recover  a  penalty  in  court  it  is  something  that  is  fixed.  You 
do  not  say,  "Here  is  a  num  Avho  has  violated  an  order;  the  penalty 
is  $25,000;  Ave  Avant  to  recover  as  much  as  ought  to  be  alloAved." 
That  Avould  haAe  to  be  a  proceeding  to  recover  a  fixed  penalty. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  135 

Mr.  KiKLix.  We  are  doing  that  every  day  in  New  York  under  the 
dumping  act,  prohibiting  dumping  in  the  harbors.  The  act  provides 
for  iinprisonment  or  a  maximum  and  minimum  penalty. 

Mr.  Saunders.  AVho  fixes  that  penalty? 

Mr.  KiRLiN.  The  judge. 

Mr.  Saunders.  The  judge  would  fix  that? 

Mr.  KiRLiN.  The  case  is  tried  just  like  this,  in  admiralty. 

Mr.  Saunders.  The  judge  would  not  fix  this,  Mr.  Kirlin.  I  think 
you  have  overlooked  the  distinction.  The  judge  would  not  fix  the 
penalty  in  line  Itt. 

Mr.  KiRLiN.  Yes;  he  would  determine  in  that  case  just  how  much 
the  penalty  is  to  be. 

Mr.  Saunders.  The  law  says  if  you  A'iolate  this  order  the  fixed 
penalty  attaches,  and  then  you  would  subsequently  proceed  in  a 
court  of  the  United  States  to  recover  that  penalty.  The  law  fixes 
that. 

Mr.  Kirlin.  I  am  submitting  to  you  that  it  is  an  unconscionable 
penalty  for  that  kind  of  thing— an  unnecessarily  large  penalty. 

Mr.  Saunders.  That  is  another  thing.  If  you  suggest  $10,000  or 
$5,000,  that  is  a  different  proposition. 

Mr.  Kirlin.  I  am  citing  the  analogy  tif  the  dumping  act  to  show 
you  that  you  do  not  have  to  fix  tlie  exact  penalty.  It  is  absolutely  the 
same  kind  of  an  act,  and,  as  I  say,  we  are  administering  that  act 
every  day  whore  the  judge  sometimes  allows  a  recovery  of  $500, 
sometimes  $1,000,  and  sometimes  $250. 

Mr.  Saunders.  This  does  not  say  that  the  tribunal  shall  award 
the  penalty,  you  notice. 

Mr.  Kirlin.  It  says  the  penalty  may  be  recovered  by  proceedings 
in  admiralty. 

Mr.  Saunders.  No;  it  says  a  penalty  of  so  much  shall  attach,  and 
then,  thereafter,  that  it  may  be  recovered  by  proceedings  in  ad- 
miralty in  the  district  court  of  the  United  States  for  the  district  in 
which  said  vessel  may  be,  and  the  court  ma.y  direct  the  sale  of  said 
vessel  for  the  purpose  of  realizing  the  amount  of  said  penalty  or 
penalties  and  cost. 

I  did  not  expect  to  take  up  so  much  time. 

Mr.  Kirlin.  The  next  suggestion  I  have  to  make  relates  to  the 
matter  at  the  top  of  page  6,  where  you  deal  with  the  question  of 
filing  agreements  and  understandings.  The  matter  was  briefly  ad- 
verted to  by  Mr.  Franklin.  The  suggestion  of  the  committee  is  "  that 
all  such  agreements,  understandings,  conferences,  and  arrangements, 
if  not  disapproved  bv  the  board,"  should  be  excepted  froiji  the  pro- 
visions of  the  act.  Instead  of  saying  "  shall  ^e  approved  or  disap- 
proved "  we  propose  to  say  "  if  not  disapproved,"  and  to  strike  out 
"  and  when  approved." 

The  Chairman.  Is  that  one  of  your  suggested  amendments  there? 

Mr.  Kirlin.  That  is  one  of  our  suggested  amendments. 

The  Chairman.  We  will  give  that  attention,  then. 

Mr.  Kirlin.  At  the  bottom  of  page  G  thei'e  is  another  illustration 
of  an  unduly  severe. penalty,  which  I  would  suggest  that  your  com- 
mittee reconsider. 

Now  we  come  to  section  4  and  section  5.  I  do  not  want  to  go  into 
a  prolonged  discussion  of  the  question  as  to  what  power  or  authority 
ought  to  be  vested  in  the  board  to  deal  with  an  "  unreasonably  high 


136  REGULATORY    FEATURES    OF    SHIPPING   BILL. 

rate."  Tluit  matter  has  been  (>t)ne  into,  so  that  I  think  you  liave  the 
views  of  the  practical  members  of  the  committee  on  the  subject.  AVe 
feel  the  first  part  of  section  4  would  be  very  difficult  to  act  under 
and  to  advise  upon,  and  that  section  5  embodies  some  matters  that  it 
is  unnecessary,  and  therefore  undesirable,  at  this  stage  of  the  devel- 
opment of  the  xVmerican  merchant  marine,  to  incorporate  in  the  act. 
Instead  of  those  sections  Ave  propose  to  redraft  section  5  so  as  to  in- 
clude in  it  the  substance  of  the  nuitter  of  sections  4  and  5  to  the  extent 
necessar}'  to  i)revent  injustice,  if  you  conclude  that  you  must  have 
regulation.  As  the  revised  paragraph  is  short,  perhaps  I  had  better 
read  it: 

•Sec.  5.  That  whenever,  after  full  hearing-  npon  a  sworn  complaint,  the  board 
shall  be  of  opinion  that  any  rates  or  charges  demanded,  charged,  or  collected 
by  any  common  carrier  by  watei-  in  foreign  connnerce  are  unjustly  discrimina- 
tory between  shippei-s  or  ports,  or  unjustly  prejudicial  to  exporters  of  the 
United  States  as  compared  with  their  foreign  competitors,  the  board  is  hereby 
'empowered  to  alter  the  rates  or  charges  demanded  to  the  extent  necessary  to 
correct  such  unjust  discrimination  or  prejudice,  and  to  make  an  order  that  such 
carrier  shall  cease  and  desist  from  such  unjust  discrimination  or  prejudice. 

And  then  we  add  the  last  sentence  of  your  section  5. 

Mr.  Hardy.  Does  that  include  the  last  paragraph  of  section  5  ? 

Mr.  KiRLiN.  Yes — "  the  board  is  hereb}^  empowered,  upon  sworn 
complaint,"  etc. 

Mr.  Hardy.  I  wish  you  would  read  that  provision  of  your  pro- 
posed section  5  over  again  so  that  I  can  get  at  it. 

(Mr.  Kirlin  read  the  revised  section  again.) 

Mr.  Hardy.  I  understand  why  you  left  out  fixmg  rates;  but  did 
you  have  any  reason  for  leaving  out  line  IS,  that  has  reference  to 
unjust  classifications? 

Mr.  KiRLix.  Between  classes  of  commodities  ? 

Mr.  Hardy.  Yes.    You  leave  in  the  other  parts  of  that. 

jSIr.  KiHLiN.  Yes;  we  did.  The  reasons  for  leaving  that  out  are  of 
a  practical  nature.  They  have  to  do  with  the  distribution  of  weight 
and  measurement  in  loading  a  shi]).  The  members  of  the  committee 
feel  that  if  carriers  wei-e  to  be  subject  to  complaints  about  rates  rep- 
resenting an  unjust  relation  between  chisses  of  commodities,  a  large 
mass  of  litigation  would  develop  as  between  owners  of  high-class 
products,  which  are  in  the  measurement  class,  and  the  owners  of 
heavy  .stai)le  products,  which  go  in  great  bulk  and  are  comparatively 
low  priced.  As  a  matter  of  i)ractical  business  nutnagement  it  is  not 
possible  to  charge  the  same  proportion  of  freight  on  all  kinds  of  com- 
modities. In  shipping,  where  your  space  is  limited  and  you  have  only 
a  certain  amount  of  buoyancy,  there  must  always  be  what  would, 
abstractly,  be  an  unjust  relation  between  the  i-ates  on  different  classes 
of  commodities. 

Mr.  Hardy.  Then  the  substantial  difference  there  between  your 
suggested  provision  and  this  is  that  you  leave  out  the  question  of 
unreasonably  high  rates  and  you  leave  out  this  question  of  unjust 
relation  between  classes  of  commodities? 

Mr.  Kirlin.  Yes.  The  provision  now  is  that  upon  a  complaint 
being  presented,  the  board  shall  have  the  power  not  merely  to  cor- 
rect the  discrimination  or  prejudice  stated  in  the  complaint,  but  may 
go  further  and  prescribe  what  shall  be  a  just  and  reasonable  rate 
thereafter  to  be  charged  as  a  maximum. 


EEGULATOEY    FEATURES    OF    SHIPPING    BILL.  137 

« 

Mr.  Hardy.  And  yon  wish  to  provide,  in  lieu  of  that,  they  shall 
have  the  power  to  prohibit  such  discrimination  ? 

Mr.  KiRLiN.  Yes;  and  to  alter  the  rates  or  charges  demanded  to 
the  extent  necessary  to  correct  such  unjust  discrimination  or  preju- 
dice. 

Mr.  Hardy.  You  leave  out  fixing  of  the  rates.  That  is  as  far  as 
you  can  go  and  be  consistent  with  the  rest  of  your  provision  there, 
as  I  catch  it. 

Mr.  KiRLix.  Yes.  Our  idea  is  that  it  is  not  necessary  to  go  any  fur- 
ther than  empower  the  board  to  correct  discriminations  and  preju- 
dices. 

Mr.  Hardy.  I  will  suggest  you  have  left  out  one  expression  which 
you  insisted  on  in  the  argument  and  which  I  have  incorporated  in  a 
note  here,  "Under  oath,  by  any  party  or  parties  interested."  You 
have  not  put  that  in. 

Mr.  KiRLiN.  We  suggest  the  first  sentence  should  read,  "  When- 
ever, after  full  hearing  upon  a  sworn  complaint,"  etc. 

Mr.  Hardy.  I  think  somebody  in  the  beginning  insisted  that  com- 
plaint should  be  made  by  an  interested  party. 

Mr.  Kirlin.  I  do  not  care  whether  the  complainant  is  interested 
or  not ;  all  I  suggest  is  that  a  man  who  comes  forward  with  a  griev- 
ance ought  to  be  compelled  to  make  oath  to  it.  If  you  insist  on  that 
the  board  will  get  rid  of  a  lot  of  annoyances  from  people  suffering 
from  imaginary  wrongs. 

Mr.  Hardy.  I  think  we  all  accept  that  proposition. 

Mr.  Saunders.  You  leave  out  the  words,  lines  16  and  17,  "  or  un- 
justly prejudicial  to  exporters  of  the  United  States  as  compared 
with  their  foreign  competitors." 

Mr.  Kirlin.  No;  I  keep  that.  Our  idea  is  that  if  you  give  the 
board  power  to  protect  the  exporters  of  the  United  States  so  that 
they  have  an  equality  of  opportunity  with  the  exporters  of  other 
countries,  they  will  need  nothing  more.  It  does  not  make  any  real 
difference  to  them  what  the  rates  are — whether  they  are  unreasonably 
high  or  not — so  long  as  their  competitors  have  to  pay  just  as  high 
rates.  That  is  the  object  to  be  aimed  at,  to  preserve  the  parity  of 
rates. 

Mr.  Hardy.  I  think  I  have  your  distinction  pretty  clear.  It  cuts 
out  that  fixing  of  rates. 

Mr.  Kirlin.  Yes.  There  may  be  cases  where  you  can  not  preserve 
the  parity,  because  the  conditions  of  the  trade  are  different.  Mr. 
Sherman,  I  think,  illustrated  that  this  morning  in  dealing  with  the 
complaint  about  the  iron  pipes.  There  was  a  condition  where  the 
carrier  from  England  was  getting  very  high  freights  back  from 
South  America  to  England,  higher  than  the  carriers  from  this  coun- 
try were  getting  down  to  Brazil  or  back  from  Brazil,  so  that  it  w^as 
practicable  to  take  these  pipes  from  England  to  South  America  at  a 
lower  rate  than  the  carriers  from  New  York  to  South  America  could 
give. 

Mr.  Edmonds.  I  want  to  say  that  Mr.  Lake,  when  he  was  before 
this  committee,  acknowledged  they  were  getting  lower  freights  from 
England. 

Mr.  Kirlin.  So  that  it  does  not  alw^ays  prove  a  point  against  the 
carriers  from  our  ports  to  say  that  in  respect  of  a  certain  commodity 
our  merchants  are  at  a  disadvantage  as  compared  with  their  foreign 


138  EEGULATOEV    FE.\TURES    OF    SHIPPING    BILL. 

competitors  in  respect  of  a  rate.  There  may  be  cases  where  they  are; 
in  others  he  may  have  the  advantage,  but  generally  they  are  on 
terms  of  equality. 

Mr.  Hardy.  I  will  make  this  suggestion  to  you,  Mr.  Kirlin.  that  in 
our  investigation  the  representatives  of  foreign  ship  lines  pretty  well 
sustained  themselves  in  claiming  there  was  no  intentional  discrimi- 
nation against  merchandise  of  this  country;  but  Mr.  Lake  insisted 
before  us  that  under  present  conditions  the  foreign  (M)untries,  espe- 
cially P^ngland.  will  see  to  it  that  their  shipping  is  given  i)referential 
rates;  and  after  this  war  England  will  start  out  with  the  purpose  of 
rebuilding  her  commerce  and  will  seek,  through  ownership  and  con- 
trol of  the  ship  lines,  to  give  the  English  commerce  a  preference  over 
American  commerce.  I  believe  in  our  hearing  that  the  witnesses 
demonstrated  that  that  had  not  been  done  for  nuiny  years;  that 
Americans  were  given  a  prett}''  fair  showing.  But  here  is  a  new  issue, 
one  of  the  future. 

Mr.  Kirlin.  Let  us  wait  until  something  develops  along  that  line. 
I  do  not  think  it  will  develop,  as  far  as  the  trade  of  P^ngland  as  com- 
pared with  that  of  this  country  is  concerned. 

Mr.  Hardy.  I  have  always  insisted  that  a  corporation  does  not 
have  any  patriotism;  they  are  going  where  the  monej^  calls  them. 

Mr.  Kirlin.  That  is  exactly  right.  Now,  if  3'ou  agree  with  me  that 
the  only  power  the  board  needs  is  to  prevent  discrimination  and 
prejudices— — 

Mr.  Hardy.  I  can  hardly  agree  with  you  in  the  presence  of  $15  a 
bale  on  cotton ;  I  think  a  little  something  is  needed  to  keep  down  ex- 
cessive rates. 

Mr.  Kirlin.  It  must  be  borne  in  mind  that  the  ship  that  carries 
that  cotton  is  going  to  incur  very  extraordinary  risks. 

Mr.  Hardy.  I  am  not  going  to  interrupt  further. 

]\Ir.  Kirlin.  That  reminds  me  to  say  that  I  recall  havinjy  heai"d  a 
gentleman,  when  I  was  present  at  a  former  hearing,  speaking  about 
high  rates,  and  arguing  from  them  that  it  would  be  a  good  thing 
for  the  Government  to  go  into  the  shipping  business  and  gather  in 
some  of  those  high  rates.  He  said  that  his  client,  one  of  Mr.  Morse's 
companies,  had  just  dispatched  a  ship  to  Archangel  on  which  the 
freight  yielded  170  per  cent  on  the  purchase  price,  out  of  which  they 
had  declared  a  dividend  right  away  of  100  per  cent.  I  read  in  the 
papers  a  few  days  afterwards  that  this  ship  had  sailed  right  into  the 
prize  court  in  England.  She  is  there  now  and  pi()bai)ly  will  be  there 
until  the  end  of  the  Avar. 

One  of  the  gentlemen  who  spoke  here  to-daj'  had  one  of  his  ships 
laid  up  for  about  three  months  in  consequence  of  a  torpedo  attack. 
Another  client  of  mine  had  a  ship  laid  up  for  an  ecjually  long  period 
in  conse(]uence  of  a  similar  attack.  The  delays  in  the  business  are 
fearfid  to  contemplate.  The  business  is  so  uncertain  and  the  risks  so 
terrific  that  in  my  judgment  it  is  not  in  any  sense  innnoral  to  take 
the  going  rates.  Some  of  the  gentlemen  here  shied  a  little  at  the 
high  rates.  I  don't.  I  do  not  think  there  is'any  such  thing  as  an 
uni-easonabl)^  high  I'ate  on  a  ship  that  is  subject  to  such  perils  and 
vicissitudes. 

Mr.  Saunders.  How  would  that  apply  to  a  situation  where  these 
perils  and  vicissitudes  do  not  exist? 


EEGULATOEY    l^EATUEES    OF    SHIPPING    BILL.  139 

Mr.  KiRLiN.  Then,  the  high  rate  does  not  exist.  I  would  take  the 
ilhistration  that  Judge  Saunders  gave  to  my  friend,  Mr.  Dearborn, 
of  the  definition  of  reasonable  care.  I  would  say  that  a  reasonable 
rate  Avas  any  rate  that  a  reasonably  prudent  man  would  charge  in 
the  business  for  doing  that  kind  of  a  service.  What  the  markets  of 
the  world  determines  to  bo  a  proper  rate,  is  a  reasonable  rate  under 
those  conditions. 

Mr.  Saunders.  In  other  words,  you  would  not  have  any  difficulty 
in  the  construction. 

Mr.  KiRLLN.  There  is  no  monopoly  now.  There  are  not  any  com- 
binations now.  Do  not  entertain  the  notion  that  combinations  exist 
at  present.  They  are  all  swept  away.  Everybody  is  on  his  own 
footing. 

Mr.  Hardy.  You  do  not  need  any  combinations  ? 

Mr.  KiRLiN.  They  do  not  need  any  combinations  now. 

Mr.  Saunders.  Let  me  ask  you  a  question  in  that  connection,  be- 
cause you  presented  a  statement  that  is  certainly  not  controlling 
with  what  I  understood  to  be  the  situation.  You  sa}^  there  are  no 
verv  hish  rates  now  except  where  the  risk  is? 

INIr.- KiRLiN.  No;  no  rates  such  as  have  been  characterized  here; 
none  that  have  increased  hundreds  of  per  cent. 

Mr.  Saunders.  The  most  ])henomenal  of  these  great  rates  may  be 
where  these  risks  are;  but  now  there  are  plenty  of  instances,  the 
world  over,  of  very  great  advances  of  rates  that  are  not  related  to 
any  risks  taken  by  the  vessels  charging  those  rates.  Certainly  that 
is  the  information  that  seems  to  come  to  us. 

Mr.  KiRLiN.  I  do  not  think  anybody  complains  about  the  rates  to 
South  America,  for  instance,  although  the  voyages  there  are  not  by 
rtny  means  free  from  perils. 

Mr.  Saunders.  Hoav  about  the  Pacific  rates? 

Mr.  KiRLiN.  They  are  naturally  controlled  by  the  Atlantic  rates. 
The  laAv  of  supply  and  demand  applies  there. 

Mr.  Saunders.  There  is  no  jieril  there,  and  yet  I  understand  some 
of  the  rates  are  pretty  steep. 

Mr.  KiRLiN.  They  are  controlled  by  the  market. 

Mr.  Saunders.  Then.  I  was  just  bringing  that  out  in  reality, 
from  the  fact  that  ships  or  lines  charge  these  great  rates  where  there 
is  no  great  peril,  so  that  other  causes  have  contributed  to  these  great 
advances  ? 

Mr.  KiRLiN,  It  is  the  peril  to  the  great  world  of  trade  that  fixes  the 
rates;  when  the  rates  are  fixed,  the  ships  that  want  to  earn  money  go 
where  those  rates  prevail. 

Mr.  Saunders.  I  think  that  is  a  very  large  view  of  it. 

Mr.  KiRLiN.  I  think  that  is  a  true  view. 

If  section  5  should  be  revised,  it  would  seem  to  us  unnecessary  to 
retain  section  4,  because  it  would  already  be  covered  by  the  provisions 
of  section  5  as  we  have  revised  it.  We  have  felt  that  there  would  be 
a  great  deal  of  difficulty  in  practical  operations  under  the  first  para- 
graph of  section  4,  page  7.  The  question  as  to  whether  a  different 
rate  for  like  commodities  on  board  the  ship  is  or  is  not  made  under 
substantially  similar  circumstances  and  conditions,  is  one  that  is 
bound  to  give  rise  to  a  great  deal  of  difficulty,  trouble,  and  probably 
litigation. 


140  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

A  great  deal  of  difference  of  opinion  has  developed  here  to-day 
among  men  who  are  leaders  on  this  general  subject.  They  do  not 
know  and  I  do  not  know  Avhat  I  would  advise  on  this  question  of 
coal  that  was  put  here  this  morning,  when  the  first  half  cargo  is 
taken  at  one  rate  and  the  second  half  at  another  rate.  I  do  not  think 
any  lawyer  would  be  justified  in  telling  his  client  how  that  would 
work  out  until  he  got  to  tlie  end  of  a  lawsuit.  A^'hat  are  "sub- 
stantially similar  circumstances  and  conditions "  when  one  lot  of 
cargo  comes  under  one  arrangement  and  another  lot  of  cargo  comes 
uncler  another  arrangement  at  a  different  rate  is  a  matter  about  which 
minds  will  inevitably  differ.  If  you  do  not  need  a  provision  of  that 
kind,  why  embarrass  the  board  and  the  trade  by  incorporating  it? 
So  long  as  you  have  a  general  provision  to  prevent  discrimination 
that  is  all  that  you  need,  and  anything  that  you  have  beyond  your 
needs  is  a  detriment. 

Now,  we  have  suggested  that  in  the  latter  part  of  this  bill,  begin- 
ning Avith  section  9,  there  is  more  provided  for  than  is  probably 
needed  in  the  way  of  means  of  investigating  complaints. 

Mr.  Hardy.  You  have  no  special  objection  to  section  6? 

Mr.  KiRLiN.  I  am  not  speaking.  Judge  Hardy,  of  interstate  com- 
merce. Our  committee  is  appointed  to  deal  with  the  foreign  trade 
only:  so  I  am  onh^^  referring  to  the  sections  that  cover  specifically 
the  foreign  trade. 

I  think  it  is  a  detriment  for  a  board  to  undertake  investigations  on 
its  own  initiative.  The  American  people  do  not  like,  to  use  a  homely 
phrase,  to  have  persons  snooping  around  into  their  business  unless 
there  is  some  very  good  reason  for  it.  and  nobody  cares  enough 
about  a  thing  to  come  down  to  the  board  and  make  affidavit  that 
there  is  an  abuse  going  on,  the  board  ought  to  consider  that  there  is 
not  any  abuse  going  on.  That  idea  runs  through  section  9  and  sec- 
tion 10. 

Mr.  Saunders.  You  want,  then,  in  line  25,  the  word  "sworn"  put 
in  after  "all"? 

Mr.  KiRLix.  Yes;  you  will  see  in  this  little  memorandum  a  refer- 
ence to  all  places  where  it  is  suggested  that  "  sworn  "  should  be  added. 

Mr.  Saunders.  And  then  to  strike  out  all  bracketed  matter? 

Mr.  KiRLiN,  Yes.  In  the  latter  part  of  that  section  the  board  is 
empowered,  upon  a  hearing  of  such  complaint,  to  order  a  discontinu- 
ance of  all  inifair  or  disci'iminating  i)ractices  which  it  may  find  to 
exist.  Then,  instead  of  a(lo])tiiig  all  such  rules  and  regulations 
which  it  may  deem  necessary.  1  slioukl  say  "make  such  order  as"; 
that  is,  point  such  order  directly  at  tlie  ])i"actice  and  not  establish 
general  rules  and  i-egulations.  At  the  end  of  that  section  Ave  have 
suggested  that  there  should  be  added  a  provision  for  procedure  upon 
hearing  of  complaints,  a  coi)y  of  which  I  submitted  to  Judge  Alex- 
ander a  fcAv  days  ago. 

The  Chairman.  That  is  under  section  10? 

Mr.  Ktrlin.  No;  at  the  end  of  section  9.  Take  in  so  much  of  that 
amenchiicnt  that  I  sent  you,  and  wliich  is  in  this  memortindum  filed 
by  Ml'.  Busli,  as  prescribes  a  method  of  procedure  and  review,  and 
leave  out  this  long  section  14  that  makes  referen(;e  to  a  whole  lot  of 
statutes  without  pointing  out  in  any  manner  what  relation  they  have 
to  this  jjarticular  lousiness.  They  really  have  to  do  with  investiga- 
tion and  i-eview.     Yet  if  anvbodv  were  for  the  first  time  to  sit  down 


EEGULATOEY    FEATURES    OF    SHIPPING    BILL.  141 

to  determine  what  the  scope  of  this  act  was  by  reference  to  all  those 
other  acts,  I  do  not  know  Avhat  opinion  he  would  form  as  to  the  power 
and  authority  of  the  board  or  the  procedure  to  l)e  followed;  whereas 
if  you  can  put  down  in  two  pages,  which  you  can,  the  exact  proce- 
dure that  ought  to  be  followed,  nameh',  a  procedure  analogous  to  a 
review  of  a  finding  of  the  Interstate  Commerce  Commission,  3^ou  will 
have  no  more  procedure  than  is  necessary. 

Mr.  Hardy.  I  would  much  prefer  your  method  if  you  can  get 
accurately  prepared  a  complete  method  of  procedure  prescribed  in 
two  pages. 

Mr.  KiRLix.  It  won't  make  more  than  two  printed  pages. 

Mr.  Hardy.  I  am  afraid  I  am  so  poorly  posted  on  the  interstate- 
commerce  act  I  would  not  know  whether  it  was  adequate  or  not  when 
I  read  it. 

Mr.  KiRLix.  I  Avill  vouch  for  it  being  adequate  for  the  protection 
of  both  sides  in  any  review  of  the  findings  of  the  board. 

Mr.  Saunders.  I  think  it  is  much  better  statute  making  to  yiut  in 
the  body  of  your  bill  your  pi'ocedure  and  what  your  remedy  is. 

]Mr.  KiRLix.  Yes.  Xow,  along  the  line  of  my  remarks  about  the 
deterrent  effect  of  these  large  fines,  may  I  say  a  word  about  section 
11?  The  section  does  not  refer  to  anything  in  particular,  and  yet 
there  are  w^ords  which  seem  to  threaten  everybody  in  the  business 
Avith  all  sorts  of  penalties  for  aiding  and  abetting  and  willfully  suffer- 
ing to  be  done,  aided,  and  abetted  any  violation  of  the  act.  It  does 
not  seem  to  me,  with  all  due  respect,  that  the  section  is  the  least  bit 
necessary  to  your  purpose  or  at  all  desirable;  for  you  have  in  section 
10  a  provision  that  any  person,  or  where  the  carrier  by  water  is  a 
corporation,  any  director  or  officer  thereof,  or  any  receiver,  trustee, 
lessee,  agent,  or  person  acting  for  or  employed  by  such  corporation, 
who  shall  willfully  falsify  in  any  manner  whatsoever,  or  who  shall 
willfully  destroy,  mutilate,  or  alter,  or  who  shall  willfully  neglect  or 
fail  truthfully  to  file  any  report,  account,  record,  rate,  and  so  on, 
shall  be  deemed  guilty  of  a  misdemeanor.  What  is  the  use,  Avhen  you 
proceed  to  provide  for  punishment  of  the  people  that  are  namerl.  of 
holding  up  a  general  threat  against  everybody  else  engaged  in  the 
business?  Somebody  may  fear  he  will  l)e  aiding  and  abetting,  though 
he  may  not  be. 

Mr.  Hardy.  Didn't  we,  have  a  case  in  some  railroad  investigation 
where  the  l>ooks  were  desired  to  complete  the  investigation,  that  they 
had  all  been  destroyed  and  we  found  there  was  absolutely  no  penalty 
for  such  a  performance? 

Mr.  KiRLix.  This  I  do  not  think  covers  that. 

Mr.  Byrnes.  Section  10  covers  that— mutilation  and  destruction. 

Mr.  KiRLTX.  There  are  a  great  many  laws  that  would  apply. 

The  Chairman.  That  is  a  modification  of  section  10  of  the  act  to 
regidate  commerce.    This  is  almost  hoc  verbis  the  same. 

Mr.  KiRLiN.  That  act  is  very  much  larger,  wider,  more  detailed, 
and  of  much  greater  ramifications.  There  is  much  more  possibility 
and  perhaps  probability  of  fraiul  in  railroad  commerce  than  there  is 
in  the  steamship  business,  where  you  have  only  one  office  (each  con- 
cern has  but  one  office),  one  manager,  and  perhaps  two  or  tliree 
clerks,  where  you  can  lay  your  hands  right  on  the  person  you  want 
and  on  the  data  that  may  be  required  for  any  hearing.  These  pro- 
visions, which  may  be  proper  enough  where  3'ou  are  going  to  control 


142  REGULATORY    FEATURES    OF    SHIPPIXG    BILL. 

a  railroad  with  thousands  of  oflicers  and  dozens  of  offices  that  may 
be  "workin<T  together  to  defeat  the  object  of  the  investigation,  have 
not  really  any  proper  application  to  this  class  of  business. 

The  Chairman.  That  may  be. 

Mr.  KiRLix.  They  do  not  seem  to  have  any  proper  place  in  a 
small  scheme  of  regulation  like  this. 

Mr.  Edmonds.  On  page  IT,  lines  7  to  15,  there  is  a  provision  about 
court  ])rocedure.  Did  you  cover  that  in  your  procedure  you  offered, 
or  ought  not  that  to  be  in  the  bill  ? 

Mr.  KiRLix.  That  is  only  a  general  provision  that  is  found  in  all 
the  statutes.  You  can  prosecute  any  crime  in  the  district  where  it  is 
committed,  under  the  general  laws. 

]Mr.  Edmonds.  Sometimes  in  drawing  a  bill,  you  know-,  you  want 
to  have  a  wdiole  lot  of  words  ahead  of  it  so  as  to  make  it  look  nice. 

Mr.  KiRLiN.  I-  think  the  shorter  the  bill  is  the  more  adxantageous 
it  will  be  for  this  particular  branch  of  commerce. 

The  Chairman.  You  think  it  is  not  necessary  to  put  the  pro- 
visions in  lines  7  to  15,  inclusive,  in  this  bill  to  give  the  courts  juris- 
diction ? 

Mr.  KiRLiN.  No;  the  general  statutes  define  where  misdemeanors 
shall  be  prosecuted,  and  as  you  provide  in  other  places  that  violations 
are  misdemeanors,  they  may  be  tried  under  the  criminal  code  in  the 
district  where  the  acts  are  committed. 

The  Chairman.  I  say,  it  would  not  be  necessary  to  incorporate 
those  provisions  in  this  bill  in  order  to  give  the  courts  jurisdiction  of 
violations  under  this  act  ? 

Mr.  KiRLiN.  No.  All  you  need  to  do  here  is  to  make  the  thing 
you  want  to  have  punished  a  misdemeanor  and  then  the  general  pro- 
visions of  the  code  dealing  with  prosecutions  of  misdemeanors  ap- 
plies to  it.    So  that  is  unnecessary. 

Mr.  Saunders.  Have  you  looked  at  the  Penal  Code  to  see  that  it 
provides  that  an  offense  when  begun  in  one  jurisdiction  and  com- 
pleted in  another  may  be  dealt  with  in  either  jurisdiction  and  pun- 
ished in  either  jurisdiction  in  the  same  manner  as  if  the  offense  had 
been  actually  and  wholly  committed  therein?  Is  that  a  general  pro- 
vision of  law  of  the  United  States? 

Mr.  KiRLiN.  No;  I  never  tried  a  criminal  case  in  my  life.  Judge 
Saunders ;  I  can  not  tell  you  about  that. 

Mr.  Saunders.  If  it  is  a  general  provision  of  the  penal  hiws  of 
the  United  States,  it  would  not  be  necessary  for  us  to  put  it  into  this 
law. 

Mr.  KiRLiN.  I  should  nijt  think  a  i)ro\  ision  of  th;;t  kind  would  be 
any  more  necessary  in  a  law  of  this  kind  than  it  would  be  in  a  law 
pi'oviding  for  the  punishment  of  misdemeanors  genei-ally. 

Mr.  Saundp:rs.  I  know  in  a  State's  jurisdiction  with  respect  to  a 
penalty  you  would  lune  to  have  an  express  statute  covering  sucli  a 
situation  as  that. 

Mr.  KiRLiN,  I  would  assume  the  necessity  for  punishing  misde- 
meanors is  very  much  greater  in  other  bi'anches  of  jui'isprudence  than 
it  is  in  this.  And  if  there  is  any  such  provision  as  this  in  the  inter- 
state-connnerce  act  it  must  be  in  other  acts  as  well  and  in  a  general 
act,  because  there  is  much  greater  need  for  providing  punishments 
than  there  is  here. 


REGULATOEY    FEATURES    OF    SIIIPPHSTG    BILL.  143 

Mr.  8a UZBEKS.  If  it  is  in  tlie  general  act,  I  agree  with  you  it  is 
not  necessar^y  to  put  it  in  here. 

jSIr.  KiRLix.  So  far  as  lines  7  to  15  ai'e  concerned.  I  do  not  think  it 
makes  any  great  amount  of  difference. 

Mr.  Ijyknes.  We  can  investigate  and  find  that  out. 

Mr.  KiKLix.  Yes. 

Mr.  Hardy.  I  would  think  it  would  be  general  law.  but  it  may 
not  be. 

Mr.  KiRLix.  Yes. 

Mr.  Edmoxds.  You  can  put  it  in  as  a  separate  section. 

Mr.  KiRLix.  Section  12  I  think  is  vicious  in  principle  in  that  it 
proposes  to  hand  over  to  private  parties  to  a  measureable  extent  the 
means  of  ]>unishment  for  not  living  up  to  the  act. 

Mr.  Hardy.  What  part  of  the  bill  are  you  referring  to  now? 

Mr.  KiKLix.  I  am  now  referring  to  section  12.  It  provides  that  a 
party  who  thinks  he  has  been  injured  can  sue  and  recover  double 
damages.  That  is  only  an  incentive  to  the  worst  class  of  people  that 
the  steamships  have  to  deal  w^ith.  persons  who  make  it  a  business*to 
speculate  on  lawsuits.    It  is  not  at  all  necessary. 

Mr.  Sauxdei.'s.  Your  only  suggestion  would  be  to  strike  out  the 
word  "  dou])le'*? 

Mr.  KiKi.iN.  Yes.  Anybody  has  a  right  to  sue  now  for  an  improper 
discrimination  which  is  practiced  upon  him  by  a  common  carrier. 
He  does  not  need  any  separate  authority  for  that. 

I  am  finding  so  much  fault  here  that  I  am  afraid  I  will  lose  my 
effectiveness;  but  I  have  one  more  section  I  think  ought  to  come  out, 
and  that  is  section  13. 

The  Ciiair:\iax.  We  want  to  hear  you  through. 

Mr.  KiRiJX.  Section  13.  I  think,  would  awaken  alarm  in  the  steam- 
ship people  more  than  any  other  section  in  the  bill.  The  idea  that 
they  Avould  have  to  keep  a  branch  office  in  Washington  in  order  to 
receive  and  answer  complaints  from  the  shipping  board  would  cause 
\"erv  grave  concern. 

The  Cumr-^iax.  This  simply  relates  to  notice. 

Mr.  Kirlix.  Yes. 

The  Chairmax.  How-  would  you  serve  notice  on  them? 

Mr.  Kirlix.  Serve  it  on  them  where  they  are  doing  the  wrong; 
serve  it  on  the  agents,  serve  it  on  the  people  you  want  to  reach. 

Mr.  Hardy.  These  shipping  people  have  some  pretty  good  attor- 
neys, like  Yourself,  to  tell  them  that  does  not  mean  that,  have  they 
not? 

Mr.  Kirlix.  What  is  the  use  of  putting  things  in  a  statute  that 
are  not  necessary  ? 

Mr.  Hardy.  That  is  a  question. 

Mr.  Sauxders.  It  is  really  put  in  for  the  convenience  of  all  parties 
concerned. 

Mr.  Kirlix^  You  are  saying  continually  we  must  assume  the  board 
is  going  to  act  thus  and  so ;  Congress  should  assume  that  the  people 
against  whom  complaints  are  made  will  be  eager  to  answer  these 
complaints.  All  you  have  to  do  if  you  get  a  complaint  about  some 
company  is  to  let  the  company  knoAv  about  it  and  you  will  get  an 
answer  pretty  promptly. 

Mr.  Hardy.  Don't  you  think  if  this  board  was  located  here  at 
Washington  that  every  one  would  have  somebody  here,  almost  ipso 


144  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

facto,  to  look  after  their  interests.  I  would  be  willing  to  swap 
off  this  .section  here  if  the  companies  would  not  have  anybody  in 
Washington  hanging  around  the  board  all  the  time. 

Mr.  Saunders.  You  will  observe  that  is  limited  to  the  board  pro- 
ceeding— entirely  a  board  proceeding.  It  was  really  put  in  here  for 
the  convenience  of  the  shipping  people  and,  so  far  as  they  are  con- 
cerned, if  they  want  this  section  out,  I  would  be  entirely  willing 
to  do  it. 

]Mr.  KiRLiN.  The  idea  is  conveyed  by  it  that  the  board  is  going  to 
be  a  busybody  board,  encouraging  complaints  and  asking  informa- 
tion about  them  all  the  time. 

]\Ir.  Hardy.  They  keep  a  bureau  here  all  the  time,  I  am  sure; 
and  if  you  would  just  designate  them  as  their  Washington  agents  it 
would  just  be  adding  to  their  duties. 

Mr.  Edmonds.  Attorneys  in  Washington  have  to  live,  Mr.  Kirlin, 
you  know. 

_Mr.  Kirlin.  I  hope  I  am  not  injuring  the  interests  of  anybody 
in  Washington,  but  I  object  to  it.  I  think  it  is  a  detrimental  thing: 
I  think  it  is  unnecessary;  it  conveys  the  idea  that  you  are  going  to 
harass  a  trade  and  that  those  engaged  in  it  must  have  somebody 
here  all  the  time  to  look  after  their  interests;  and  that  is  just  exactly 
contrary  to  what  you  have  in  your  minds. 

The  Chairman.  Certainly. 

Mr.  Saunders.  Just  to  have  some  one  here  upon  whom  service  can 
be  made;  and  it  seems  to  me  that  would  be.  possibly,  for  their  con- 
venience. 

^Ir.  Kirlin.  It  is  not  important  in  itself:  it  is  just  one  of  a  number 
of  things  that  are  sticking  out  all  over  the  face  of  the  bill,  from 
one  end  to  the  other,  which  have  a  deterrent  effect  upon  persons  con- 
templating going  into  the  shipping  business.  If  this  business  is 
going  to  be  hedged  around  with  so  many  restrictions  and  so  much 
regulation  and  inquisition,  investors  won't  have  anything  to  do  with 
it.  but  will  put  their  money  into  some  other  kind  of  business. 

The  Chairman.  We  do  not  know  just  where  to  locate  these  gen- 
tlemen. When  Mr.  Franklin  was  here  before,  in  criticizing  section  9, 
he  said.  ''I  am  heartily  in  favor  of  the  report  of  the  committee  and 
also  bill  450."  Well,  this  bill  has  in  it  just  ])art  of  the  provisions  of 
bill  450. 

Mr.  Kirlin.  What  Mr.  Franklin  had  in  mind.  I  think,  was  the 
conference  provision — I  Avish  you  had  asked  him  about  that  this 
morning.  lie  pointed  out  at  the  top  of  the  ])age  there  that  he  did 
not  mean  to  include  the  regulatory  ]H-ovisions  in  his  indorsement. 
Tie  had  in  mind  the  ])rovisions  (»f  your  iv])ort  and  of  the  bill  that 
you  drew  in  relation  to  it.  I  understood  he  did  not  subscribe  to  the 
doctrine  in  regard  to  the  regulation  of  rates. 

The  CnAHniAN.  Tiiis  is  ^Ii-.  Franklin's  statement : 

We  coiisidtM-  Hint  I  lie  liill.  No.  -I.")*).  ])r<ivi(lin,i:-  for  a  lioard.  wiiicli  your  coiii- 
iiiittoc  iiilro(lucc(|  aftci-  a  very  cart'l'iil  invest  iuat  ion  of  all  llic  sliiiMiinjr  condi- 
tions, is  a  very  fair  bill.  We  feel  lliat  there  nii.irlit  1)(>  some  sli.udit  modifica- 
tions as  to  the  control  over  rates  that  the  hoard  would  have  immediately  be- 
fore tliey  had  had  an  fipix'rl  unity  of  tliorouuhly  stiidyin.i,'  the  situation  and  be- 
coinin';  conversant   with  i1. 

Mr.  Kirlin.  That  is  what  lie  told  you  to-day,  sul)stantially,  as  I 
understood  his  testimony. 


EEGULATOEY    FEATURES    OF    SHIPPING    BILL.  145 

The  Chairman.  And  then,  again,  he  says,  speaking  of  it: 

Tlie  Chatumax.  Would  it  he  worth  while  to  have  a  board  and  just  pay 
salaries  to  them  and  not  j;ive  them  any  powers  of  supervision? 

Mr.  Fraxklix.  No;  I  tliink  the  hoard  should  have  absolute  power  of  super- 
vision. I  feel  the  board,  after  they  investiKate  the  matter  thoroughly,  if  they 
feel  a  steamshij)  company  is  doinp;  anythinji  unreasonable,  should  have  the 
power  to  correct  it. 

The  Chaikmax.  That  is  what  the  provision  is  intended  to  do. 

Mr.  Fraxklix.  I  think  H.  R.  450  covers  that. 

The  Chatrmax.  We  have  tried  to  avoid  the  difhculties  you  have  in  mind  in 
this  bill. 

Mr.  Fraxklix.  As  I  told  you  before,  in  testifying  before  the  committee  at 
that  time.  I  was  never  ojjposed  to  that.  I  feel  that  the  United  States,  with  its 
tremendous  coimnerce,  nnist  have  somebody  here  in  Washington  before  whom 
the  shippers  can  make  a  plea  ;  that  they  can  put  before  them  anything  that  they 
think,  in  their  opinion,  lias  been  an  unrea.sonable  act  on  the  part  of  the  steam- 
ship comp.iny  or  steamship  operators.  But  I  feel  that  it  would  ))e  a  very  seri- 
ous mistake  to  pass  any  bill  which  includes  a  reference  to  the  interstate  com- 
merce act.  The  conditions  are  absolutely  different.  One  is  a  local  and  the 
other  an  intei-natioiial  question  and  can  not  be  dealt  with  as  are  the  railroads. 

The  Chaikmax.  If  the  j)rovisions  of  section  9  were  stricken  out  of  this  bill 
and  the  provisions  of  H.  K.  4.50  inserted  in  lieu  of  them,  you  think  that  would 
make  a  better  bill  as  far  as  r«?gulation  is  concerned? 

Mr.  Fraxklix.  I  say  that  that  would  make  a  decidedly  better  bill,  to  be 
coupled  with  the  elimination  of  the  licen.se  feature. 

The  Chairmax.  I  hardly  think  there  would  be  any  reason  for  the  license 
feature  in  that  event ;  that  is,  if  the  provisions  of  the  House  bill  No.  4.50  were 
incorporated  in  this  bill  and  .section  9  stricken  out. 

:Mr.  Fraxklix.  My  position  has  always  l)een  it  is  foolish  to  argue  against 
a  board.  The  I'nited  States  should  have  some  board  of  this  kind.  That  board 
should  study  the  whole  shipping  problem.  It  should  make  its  recommenda- 
tions; it  should  be  a  lioard  similar  to  the  British  Board  of  Trade.  It  should 
have  control  over  all  rules  and  regvdations,  measurements,  inspections,  and 
everytliing  else  now  covered  by  the  Department  of  Commerce.  It  should  be 
the  United  States  authority  regarding  shipping  and  the  authority  in  control. 

I  do  not  knf»w  whether  I  have  made  it  sufficiently  clear  about  the  damage 
that  I  fear  might  be  done  to  the  connnerce  if  the  rates  should  be  too  sevei-ely 
regulated  :  but  if  there  are  any  questions  on  that  I  shall  be  glad  to  answer 
them. 

I  have  read  all  of  his  statement. 

}>h-.  KiRLix.  Xow,  Mr.  Chairman,  I  am  sorry  that  you  did  not 
speak  to  Mr.  Franklin  about  that  to-day,  because,  as  yon  know,  he 
is  friendly  to  the  general  object  you  have  in  view  here. 

The  Chairman.  I  think  his  attitude  has  always  been  very  fair. 

]\Ir.  Khu.in.  AVhat  he  had  in  mind  there — he  had  not  the  bill 
before  him  and  was  not  discussing  it — was  the  general  suggestion 
that  Avas  contained  in  your  report  about  controlling  conferences, 
filing  of  documents,  and  exercising  proper  supervision  over  the  ship- 
per and  the  shipping  business  and  also  the  right  to  correct  al)uses 
in  a  broad  way.  But  I  do  not  think  he  intended  to  indorse  or  had 
m  his  mind  at  the  time  these  inquisitorial  features  of  this  bill  to 
Avhich  I  have  made  special  reference. 

Now.  one  of  the  members  has  just  made  a  suggestion  as  to  section 
13.  that  reminds  me  of  something  else  I  wanted  to  say  before  I  sit 
down.  Section  13  provides  that  it  shall  be  the  duty  of  every  com- 
mon carrier  by  water  or  other  person  subject  to  the  act  to  designate 
in  writing  aii  agent  in  the  city  of  AVashington.  Xow,  you  have 
not  anywhere  in  this  bill  defined  what  you  intend  to  include  in  the 
denomination  "  common  carrier." 

Mr.  Edmonds.  At  the  top  of  the  page  2,  Mr.  Kirlin. 

38534—16 10 


146  KEnULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  KiKLiN.  That  is  in  interstiitc  coinineivi'.  On  page  i  of  the 
bill  "a  co]nmon  carrier  is  simply  defined  as  a  comnu  n  carrier."'  A 
common  carrier  hy  water  mean'^  siicli  a  common  carrier  engaired  in 
the  trans})ortation  business,''  and  so  on.  Xow.  a  man  who  has  one 
ship  may  be  a  commoD  carrier,  or  a  man  who  has  a  dozen  ships  may 
net  be  a  common  carrier  at  all,  depending  upon  the  manner  in  which 
the  sliips  are  operated.  Nine-tenths  of  the  tramp  tonnage  of  the 
world  that  comes  into  our  ports  does  not  operate  here  as  a  connnon 
carrier  nor  sustain  the  relations  of  a  common  carier  to  American 
shipi)ei"s.  Such  ships  generally  are  bailees  for  hire;  or,  as  the  law 
calls  them,  special  carriers.  As  this  bill  now  stands  the  board  would 
not  have  the  slightest  control  or  poAver  over  tlie  tramp  steamers  that 
come  here,  unle-s  they  go  on  the  berth  and  are  offered  generally  to 
receive  the  goods  of  all  shippers.  So  that  if  you  have  in  mind  the 
enactment  of  regulations  that  will  include  more  than  30  i)er  cent 
of  the  carriers  tliat  a  isit  our  poits  you  will  ha\e  to  make  a  different 
definition. 

Mr.  Hardy.  Let  us  get  your  idea  clearly.  Your  opinion  is  that  a 
tramp  steamer  coming  to  New  York,  for  instance 

Mr.  KiuLiN.  Leading  a  cargo  of  grain. 

Mr.  LIaroy.  Seeking  a  cargo  is  nut  a  common  cai'i'ier? 

IMr.  KiRLix.  No. 

Mr.  Edmoxds.  And  therefore  would  not  be  rei^uired  to  have  an 
office  in  Washington  or  anj^thing  else  under  this  act. 

Mr.  KiRLiN.  It  w^ould  not  have  to  have  an  office  here  or  be  in  a 
position  to  receive  any  notice  here,  or  be  subject  to  any  of  the  pro- 
visions of  this  act. 

The  CirAiiniAX.  That  is,  for  instance,  if  they  were  to  go  on  the 
berth  and  ship  a  cargo  of  coal  to  a  foieign  ])ort,  it  would  not  be  a 
connnon  carrier:! 

Mr.  KiHLiN.  No. 

The  Chairman.  Suppose  it  would  take  part  coal,  part  avooI,  part 
cotton,  and  different  things? 

Mr.  KiRLix.  If  tramps  went  on  the  berth  and  offered  themselves 
genei-ally  to  receive  goods  of  all  shippers,  they  would  be  common 
cai'riers.  But  there  might  be  two  charters  on  the  same  boat,  such  as 
a  chartei-  of  the  meat  space  to  one  ]')erson  and  a  chartoi-  of  the  grain 
space  to  anothei'. 

The  Chairman.  It  would  be  a  common  carrier  then  ^ 

]\Ir.  KiuLiN.  No;  it  would  be  a  special  cai'rier  only,  because  it 
would  only  be  dealing  on  special  agreements. 

Mr.  Hahoy.  They  would  have  to  chai'tei-  ceitain  sj^ace  and  they 
would  carry  theii'  own  risk. 

Ml'.  KiRLiN.  Such  ships  would  be  subject  to  the  liabilities  of  a 
special  cari-ier  or  bailee;  that  is,  they  would  be  liable  for  negligence 
but  not  under  an  insurers  liability  as  a  couunon  cari-ier.  Xow  tramps 
do  not  come  to  New  York,  your  connnittee  should  bear  in  mind,  and 
nialce  their  engagements  here.  Tramp  steamers  make  theii'  engage- 
ments in  the  great  chartering  markets  of  the  world,  liefore  a  tram]) 
steamer  would  come  to  this  country  at  all,  it  would  have  l)een 
chartered,  in  time  of  peace,  either  in  London  or  Hamburg  or  Rotter- 
dam. The  agreement  would  not  be  for  the  business  of  a  connnon  car- 
rier at  all.  It  woidd  be  one  of  two  things,  eithei-  an  agieenient  to 
furnishing  the  si)ace  of  the  shi})  to  one  person  for  a  lum[)  sum,  or 


EEGULATORY    FEATURES    OF    SHIPPIKG    BILL.  147 

nil  a<j!:reeinent  to  carry  gTain  at  so  imicli  a  (Hiarter,  or  coal  at  so  iiiiicli 
a  ton.  Tliat  agreenieiit  would  not  be  made  here  at  all;  the  only  trans- 
action under  it  that  would  take  place  here  would  be  the  loadins;  of 
the  cargo. 

The  C11AIR31AN.  That  kind  of  carrier  does  not  come  within  the 
provisions  of  this  bilk 

Mr.  KiKLiN.  Xo.  Now^,  how  are  you  going  to  regulate  the  rates 
on  one-third  of  the  tonnage  of  the  world,  which  makes  its  rates  at 
the  dock,  with  the  shipper  who  brings  his  goods  there,  when  the  rates 
for  two-thirds  of  the  tonnage  of  the  world  are  made  in  foreign 
poits? 

^Ir.  Hai;dy.  Wliat  [)ercentage  of  value  does  that  <')(j§  per  cent  of 
the  tonnage  amount  to  in  the  commerce  of  the  world  of  the  freight 
carried  ? 

Mr.  KiRLix.  I  could  not  give  you  an}'  idea. 

Mr.  Hardy.  I  understand  in  bulk  it  is  66f  per  cent. 

IVIv.  KiRLiN.  Yes. 

Mr.  IiAr.DY.  The  >alue,  1  presume,  would  not  be  15  per  cent, 
would  it  ? 

Mr.  KiRLiN.  Oh,  yes. 

Mr.  Hardy.  You  think  so? 

Mr.  KiRLix.  Most  of  your  cotton  is  carried  that  way. 

]Mr.  Hardy.  Cotton  is  not  a  special!}'  valuable  commodity  in  pro- 
■  portion  to  the  space? 

Mr.  KiRLix.  Well  grain  is  carried  that  way  almost  entirely,  ex- 
cept small  quantities  that  go  on  the  big  liners;  nitrates,  lead,  ores, 
and  lumber  are  carried  under  such  charters. 

Mr.  Hardy.  What  percentage  of  that  GGf  pei-  cent  is  lumber^ 
That  is  a  big  percentage? 

Mr.  KiRLix.  I  have  not  the  data  about  that.  It  would  not  be 
projDer  for  me  to  speculate  upcn  it. 

Mr.  Edmoxds.  I  want  to  call  your  attention  to  section  13,  requir- 
ing offices  in  Washington.  It  says,  "  or  other  persons  subject  to  this 
act."  You  did  not  say  anthing  about  that.  It  says  here  "  or  other 
persons  subject  to  this  act''  must  designate  an  agent  in  the  city  of 
Washington.  That  means  a  man  operating  ships  must  have  an 
officer  here  in  Washington;  a  man  running  a  ferry  must  have  an 
officer  here  in  Washington;  a  man  running  tugboats  must  have  an 
officer  here  in  Washington ;  a  man  running  a  transfer  lighter  must 
have  an  officer  here  in  Washington ;  and  a  warehouseman  would  have 
to  have  an  officer  in  Washington ;  and  a  man  having  terminal  facili- 
ties would  have  to  have  an  officer  in  Washington  upon  whom  service 
of  all  notices  could  be  made. 

Mr.  KiRLix.  That  term  "  common  carriers"  is  a  very  wide  term.  I 
reminded  Mr.  Bush,  last  night,  that  he  would  have  to  haA^e  an  agent 
down  here,  because  his  lighters  transfer  goods  as  common  carriers 
from  the  railroad  terminals  at  Jersey  over  to  his  terminals  in 
Brooklyn. 

The  CiiAiRMAX.  It  is  very  iini)ortant  they  should  be  regulated, 
because  we  have  a  specific  complaint  by  shippers  of  naval  stores 
that  Avhile  the  rate  to  Xew  York  was  reasonable,  yet  the  lighters  in 
New  York  charged  an  unreasonable  rate  and  discriminated  between 
shippers  of  naval  stores. 


148  EEGULATORV    FEATURES    OF    SHIPPING    BILL. 

Mr.  KiitLix.  "^'oii  Avoiild  probably  find,  Avheii  you  came  to  sift  tliat 
complaint,  that  the  particular  shipper  of  the  naval  stores  Avas  not 
in  a  position  to  get  lighters,  because  he  could  give  no  assurance  as 
to  when  he  would  be  able  to  get  the  stores  off  the  lighters.  When 
the  demand  for  lighter  tonnage  is  as  great  as  it  is  now  lightermen 
hesitate  to  take  goods  on  lighters  unless  they  are  assured  the  ship- 
])ers  will  be  able  to  unload  the  lighters  within  some  reasonable  length 
of  time. 

(Tliereiipon.  at  r».15  o'clock  p.  m.,  the  conuuittee  adjourned  until 
to-morrow.  Wednesday,  April  1*.>.  IDIG,  at  10.30  o'clock  a.  m.) 


C'OMJUTTEE  ox  THE  JNIeUCHANT  MaKINE  AND   FlSHEUlES, 

House  or  Representatives, 
Wm7iin(/ton,  D.  (\.  Thnrsdmj^  April  20^  1916. 
The  committee  met  at  10.80  o'clock  a.  m..  Hon.  Joshua  W.  Alex- 
ander (chairman)   presiding. 

The  Chairman.  ]Mr.  Rhett,  president  of  the  Chamber  of  Com- 
merce of  the  United  States,  is  here  to-day  at  my  invitation,  and  we 
Avill  hear  him  on  H.  R.  14337.  which  the  committee  has  under  con- 
sideration. 

STATEMENT  OF  MR.  R.  G.  RHETT,  CHARLESTON,  S.  C,  PRESIDENT 
OF  THE  CHAMBER  OF  COMMERCE  OF  THE  UNITED  STATES. 

Mr.  RiiETT.  As  I  understand  it.  this  bill  is  introduced  as  a  substi- 
tute for  sections  9  and  10  of  the  shipping  bill  I 

The  Chairman.  Yes ;  H.  R.  10500. 

Mr.  RiiETT.  I  only  wish  to  state  that  in  referendum  Xo.  0.  which 
the  chamber  took  in  1915.  we  had  three  ballots  which  directly  refer 
to  this  subject. 

The  fii-st  l)allot  was  on  the  creation  of  a  Federal  shipping  board 
to  investigate  and  report  to  Congress  regarding  the  navigation  hnys, 
and  to  have  full  jurisdiction,  under  the  law,  in  all  matters  pertain- 
ing to  over-sea  ti-ansportation,  upon  which  the  vote  Avas  039  to  116. 
If  this  bill  takes  the  place  of  sections  9  and  10  of  the  shipping  bill, 
it  eliminates  that  clause  Avhich  is  at  lu-esent  in  section  9.  D<)  I 
understand  it  is  proposed  to  eliminate  that  altogether,  or  to  provide 
for  that  in  some  other  way? 

The  CiiAiR.MAX.  That  part  of  section  9  which  provides  for  an 
investigati(m  of  our  navigation  laws  will  be  taken  caie  of  in  another 
way.  I  gave  you  a  tentative  di-aft  of  a  section  we  have  under  con- 
sideration. 

Mr.  RiiETT.  I  have  read  that  draft  whicli  you  have  just  handed 
to  me.  and  it  seems  to  cover  the  point  whicli  is  referred  to  in  that 
l)allot  admirably. 

Tlie  CiiAiiniAN.  You  might  let  that  go  in  the  record. 

(Tlic  section  ivferred  to  is  as  follows:) 

'l"l::U  il  slijill  lie  llic  <liil.v  of  llic  lioai'd  In  unl licr  :iii<l  coiiiitUe  infoniiiilioii  coii- 
(•(■i-niii;;-  and  to  iiivfsl  i;;ai('  llic  rclaliM-  cnsl  oT  buildiiifi-  inei-cliiiiit  v«'sst'ls  in 
tlic  Unilcd  Stales  and  in  fdi-eiiiii  niaritinio  counlrii'S,  and  also  the  relative  cost, 
of  oiiiTatintr  in  foi'ei,u:ii-trad<'  vessels  \indor  American  registry  mid  similar  ves- 
sels nndcr  I  lie  lljigs  of  other  nations.  Tt  shall  also  examine  the  navigation 
laws  of   (lie  United  States  and  the  rules  and  regulations  based   thereon,   and 


EEGULATORY    FEATURES   OF    SHIPPING   BILL.  149 

make  such  reconiniendations  to  Conijress  us  it  may  deem  proper  for  the  auieml- 
ment,  improvement,  and  revision  of  such  laws  and  for  tlie  develoi)ment  of  the 
Ameriean  mercliant  marine.  It  shall  aiso  investijiiite  the  advanta.i;es  and  dis- 
advantajies  of  operatin,!j;  under  Uniled  States  registry  and  under  the  registry 
of  other  nations.  It  slnill  also  investigate  the  legal  status  of  mortgage  loans 
on  vessel  property,  with  a  view  to  improving  the  security  of  such  loans  and 
encouraging  investment  in  American  shijiping.  It  shall  report  annually  to 
Congress  tlie  results  of  its  investigations  and  its  reconnnendations. 

Mr.  Khett.  I  have  read  this  draft,  and,  as  far  as  my  judgment 
goes,  it  covers  the  subject  thoroughly. 

The  fifth  question  on  the  baHot  presented  the  recommendation  of 
the  chamber's  connnittee  that  Federal  licenses  should  be  taken  out 
l)y  lines,  domestic  and  foreign,  engaged  in  shipping  between  ports  of 
the  United  States  and  other  countries;  on  this  the  vote  was  GlOto  120, 
Section  10  of  House  bill  10500  provides  for  licenses.  Do  I  under- 
stand that  it  is  intended  to  eliminate  that  provision^ 

The  Chairman.  If  it  is  eliminated,  it  will  be  for  the  reason  that 
bill  14387  ])rovides  specific  penalties  for  violations  of  the  law,  and 
in  the  event,  I  assume  it  will  not  be  necessar}'  to  include  the  license 
feature  in  section  10,  However,  that  is  a  question  that  the  com- 
mittee has  not  determined  finally. 

Mr.  Rhett.  I  just  wanted  to  call  attention  to  the  fact,  as  I  am  only 
recording  the  position  which  the  chamber  has  taken  in  this  referen- 
dum. 

The  fourth  question  on  our  ballot  was,  Should  there  be  legislation 
abolishing  deferred  rebates  and  providing  for  supervision  of  rates 
by  the  Federal  shipping  board,  Avith  requirements  for  filing  with 
the  board  schedules  of  rates  and  all  agreements  among  over-sea  lines  ^ 
"With  our  referendum  Avas  i^rinted  the  bill — I  think  it  was  bill  H.  R. 
450,  which  is  practically  the  same  as  the  bill  now  before  us.  except 
that  the  present  bill  puts  the  jurisdiction  in  a  shipping  board  instead 
of  in  the  Interstate  Commerce  Commission,  and  with  a  few  other 
changes. 

The  Chairman.  It  is  in  your  referendum  No.  9.  It  is  the  text 
verbatim  of  bill  No.  450,  as  I  introduced  it  in  this  Congress. 

Mr.  Rhett.  I  would  like  to  call  attention  to  the  fact  that  we  only 
dealt  with  the  over-sea  shipping;  I  do  not  think  we  have  ever  taken 
any  referendum  on  the  subject  of  coastwise  or  lake  shipping. 

The  vote  approving  regulation  of  over-sea  shipping  was  GOl  to 
130,  and  the  bill  I  have  mentioned  was  printed  in  the  referendum 
pami)hlet  as  an  exhibit,  so  that  while  we  can  not  say  that  each 
organization  which  voted  affirmatively  voted  for  the  exact  pro- 
visions of  the  bill,  it  is  a  fair  inference  to  be  drawn.  In  printing 
the  results  of  the  balloting  we  tabulate  what  each  organization  has 
to  sav  in  connection  with  its  vote  when  it  does  not  vote  uncondition- 
ally and  s(iuarely  upon  the  question  presented.  If  any  of  you  gen- 
tleinen  have  this  tabulation,  you  will  see  there  are  several  images  of 
comment  which  the  organizations  made  in  connection  with  their 
votes  when  they  were  unal)le  to  vote  scjuarely  on  the  proposition  in 
the  referendum.  For  instance,  the  San  Francisco  Chamber  of  Com- 
merce voted  ''  no,"  and  filed  this  statement : 

It  would  also  prefer  to  divide  the  fourth  cpiestion  of  the  second  ballot  and 
vote  in  favor  of  abolition  of  defcn-cd  rebates,  but  against  supervision  of  I'ates  l)y 
the  shii)])ing  board. 


150  REGULATOBY    FEATLTReS    OF    SHIPPING    BILL. 

Being  unable  to  divide  the  question  as  presented  in  the  referendum, 
they  voted  against  it  entirely.  We  will  be  very  glad  to  file  with  you, 
if  you  desire,  a  complete  statement  of  the  A'otes  and  comments;  it 
will  show  the  comments  wherever  the  organizations  did  not  vote 
squarely  on  the  questions  as  they  were  i)resented. 

The  organizations  participating  in  the  referendum  cast  GOl  votes 
to  130  for  the  creation  of  a  Federal  shipping  board,  with  require- 
ments for  filing  Avith  the  board  schedules  of  rates  and  all  agreements 
among  o^■er-sea  lines. 

I  think  that  is  as  much  as  I  am  able  to  go  in  making  a  statement 
in  the  matter,  as  I  am  not  an  expert  on  shipping.  I  can  only  record 
with  you  gentlemen  what  the  members  of  the  Chamber  of  Commerce 
of  the  United  States  have  voted  on  and  hoAV  they  voted. 

Mr.  Hadley.  I  understand  that  bill  Xo.  450  was  not  submitted  as 
a  concrete  example  by  the  chamber. 

Mr.  RiiETT.  No;  it  was  only  put  as  an  exhibit,  and  therefore,  of 
course,  it  was  net  voted  en  specifically.  It  was  only  given  as  an 
illustration  of  how  it  is  proposed  to  make  this  regulation.  I  think 
I  might  read  this  paragraph  from  the  report  of  our  committee, 
based  upon  which  the  ballots  were  cast. 

Mr.  GREE^'E.  On  which  line?  On  everything  that  was  referred  to 
them  under  the  referendum,  or  only  on  these  items  you  have  men- 
tioned ? 

Mr.  Rhett.  No;  this  is  a  paragraph  in  the  committee's  report  re- 
ferring specifically  to  the  regulation  which  we  are  talking  about, 
which  is  included  in  H.  R.  No.  14337.  The  paragraph  I  am  about  to 
read  is  in  the  report  of  a  majority  of  the  connuittee,  and  in  the  corre- 
sponding question  the  balloting,  as  I  have  said,  resulted  in  601  affir- 
mative votes  and  130  negatives. 

Legislation  is  pending  providing  for  the  suix-rvision  of  ocean  freight  rates,  the 
filing  of  sciii'dules  and  agreements  between  dilfereiit  lines,  granting  the  right  of 
shipi)ers  to  apply  for  rate  redactions  and  to  correct  abuses,  calling  for  ;i  proper 
system  to  secure  payment  of  .just  claims,  al)olisliing  deferred  rebates  and  uniust 
discriminations  against  shji>pers,  recpiiring  that  concessions  granted  in  advance 
contracts  must  apply  to  all,  and  dealing  with  the  correction  and  regulation  of 
shii)ping  mattei's  for  public  protection.  Your  connnittoe  are  heartily  in  favor 
of  such  legislation,  with  all  such  matters  jilaced  in  cliarge  of  the  Federal  ship- 
ping board. 

That  w'as  the  report  of  the  committee  on  that  subject,  and  it  was 
upon  this  report  that  the  question  in  the  referendum  about  regulation 
of  over-sea  lines  was  based. 

I  do  not  know  that  there  is  anything  fiu'ther  you  gentlemen  Avant 
ot  me. 

Mr.  Gree>;e.  I  would  like  to  ask,  does  the  paper  that  you  have  filed 
cover  the  whole  action  of  your  association  on  all  matters  that  were 
referred  to  them  relative  to  this  shipping  bill?  For  instance,  do  you 
favor  the  Covernment  undertaking  the  purchase,  construction,  or 
charter  of  vessels  for  mercantile  purposes,  together  with  the  oper- 
ation of  such  vessels?     Is  that  vote  included? 

Mr.  RiiETT.  In  the  ballot? 

Mr.  Greene.  Yes;  referendum  No.  9. 

Mr:  Rhett.  Oh,  yes. 

Mr.  Greene.  It  shows  that  89  people  voted  in  favor  and  (iOO  voted 
as  opposed  to  the  purchase,  construction,  or  charter  of  vessels  for  mer- 
cantile purposes,  together  with  the  operation  of  such  vessels? 


RKGUI.ATORY    FEATURES    OF    SHIPPING    BILL.  151 

Mr.  KiiEJT.  Yes;  that  is,  89  votes  in  favor  and  GOO  opposed.  The 
votes  are  determined  by  the  ballots  of  organizations,  not  of  indi- 
viduals. 

Mr.  Greene.  And  also  in  regard  to  the  ownership  of  vessels  by  the 
Government,  to  be  operated  by  private  parties  under  lease. 

Mr.  Rhe'jt.  51  in  favor  to  713  opposed. 

Mr.  Greene.  That  is  all  there? 

Mr.  Rhett.  That  is  all  there,  in  the  same  referendum.  I  was 
speaking,  however,  only  about  the  regulation  that  is  proposed  in  bill 
No.  14337. 

Mr.  Greene.  There  has  been  some  testimony  here  by  some  parties 
who  have  testified  that  these  referendums  Avere  not  taken  with  due 
care,  or  with  sufficient  explanations  to  boards  of  trade  that  voted. 
What  is  your  understanding?  Was  it  your  understanding  that  they 
voted  blindly,  or  with  a  full  understanding? 

Mr.  Riiett.  Mr.  Fahey  presented  to  this  committee  some  months 
ago  a  complete  tabulation  of  how  these  votes  were  taken  by  each 
organization.  I  have  a  copy  of  that  before  me,  and  I  can  answer 
you  with  reference  to  any  organization,  because  I  have  here  a  com- 
plete tabulation  showing  exactly  how  they  arrived  at  their  decision. 

Mr.  Greene.  I  think  the  thing  was  fairly  taken.  I  am  only  asking 
your  view,  wdiether  it  was  fairly  taken  or  unfairly  taken.  I  am  not 
in  opposition  to  your  method  of  doing  business ;  I  think  this  proposi- 
tion w\as  fairly  taken  by  the  various  chambers  of  commerce,  and  was 
a  fair  representation  of  the  general  sentiment  of  the  commercial  or- 
ganizations throughout  the  country ;  not  perfect,  probably,  but  fair. 

The  Chairman.  You  will  find  that  same  referendum  offered  by 
Mr.  Fahey  on  page  172  of  our  hearings  on  H.  R.  10500. 

Mr.  Greene.  I  am  not  finding  fault  with  that.  I  am  simply 
asking  Mr.  Rhett,  as  the  present  president  of  the  chamber  of  com- 
merce and  an  active  man  in  the  commercial  business  of  the  country, 
and,  consequently,  responsible  in  the  position  he  now  holds,  as  to 
what  his  view  is  as  to  the  method  which  was  pursued  by  the  body 
over  M'hich  he  now  presides,  in  their  attempt  to  get  at  the  business 
sentiment  of  the  country  in  regard  to  this  shipping  bill ;  whether  he 
thinks  it  was  fairly  taken  or  unfairly  taken;  whether  an  honest  effort 
was  made  to  secure  the  views,  or  whether  it  w^as  a  fake  proposition. 

Mr.  Rhett.  As  to  that  I  wish  to  say  our  purpose  is  to  endeavor 
to  get  the  business  men  to  think  on  these  questions  themselves,  and 
to  that  end  we  give  them  what  information  we  can,  try  to  state 
the  question  fairly  and  squarely,  and  do  all  we  can  to  see  that  in  the 
pamphlet  used  in  taking  a  referendum  the  arguments  that  can  be 
fairly  urged  on  both  sides  are  impartially  presented.  We  ask  them, 
after  they  have  studied  the  question,  to  send  us  in  their  opinion. 
We  believe  we  are  succeeding.  We  find  their  interest  growing  more 
and  more,  and  that  the  votes  which  are  sent  in  are  representative  of 
the  sentiment  of  the  communities  represented  by  the  organizations  in 
our  membership.  Here  and  there  you  will  find  a  vote  carelessly 
taken,  but  for  each  referendum  we  now  go  to  the  officers,  asking  the 
manner  in  which  their  organization  is  committed  in  the  referendu.m. 
This  procedure  on  our  part  is  resulting  in  these  ballots  being  thor- 
oughly representative  of  the  business  sentiment  of  the  organization. 


152  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Edmonds.  Mr.  Rhett,  we  had  before  us  last  week  Mr.  Isidor 
Jacobs,  president  of  the  California  Canneries  Co.,  a  New  York  con- 
cern, who  stated  that  the  chamber  of  commerce  of  which  his  concern 
is  a  member  in  California 

Mr.   Rhett.  What  chamber  is  that? 

Mr.  Edmonds.  The  Chamber  of  Commerce  of  San  Francisco. 

Mr.  Rhett.  Yes. 

Mr.  Edmonds.  That  his  chamber  sent  out  a  notice,  of  which  he 
has  sent  us  a  copy,  in  which  he  said  they  were  told  how  to  vote,  and 
that  they  voted  that  wa}'.    I  think  I  am  correct  in  that. 

Mr.  Hardy.  I  think  so.  Did  he  give  a  copy  of  the  notice  he  said 
they  sent  out ^ 

Mr.  Edmonds.  Yes.  He  said  the  result  was  that  out  of  over  3,000 
members  not  more  than  one-fifth  responded,  the  other  four-fifths 
not  responding  to  the  referendum  at  all.    He  said : 

You  will  understand  that  it  is  based  niton  this  referendum  (if  llie  Sail 
Francisco  Chanil)er  of  Conuuerce  that  tlie  United  States  Chamber  of  Commerce 
figures  the  referendum  that  tliey  take  from  the  San  Francisco  Chamber  of 
Commerce,  so  that  it  can  readily  l)e  seen  that  the  expression  of  the  San 
Francisco  Chamber  of  Commerce  is  not  an  exiiression  of  the  business  interests 
connected  with  the  San  Francisco  Chamber  of  Commerce,  and  I  have  reason 
to  believe  that  practically  all  chambers  of  conuuerce  in  our  lariie  cities  are 
similarly  handled. 

Now^  he  inclosed  here  a  copy  of  the  referendum  as  it  was  sent  out,  and 
then  he  says  that  most  concerns  voted  as  was  recommended  to  them. 

Do  you  know  anything  about  that?  Did  you  recommend  from 
your  parent  chamber  of  commerce  how  ])e<)pk'  should  vote  on  this  in 
the  different  chambers  of  commerce  ? 

Mr.  Rhett.  Not  at  all.  We  have  never  attempted  even  to  suggest 
to  them  any  form  of  procedure  to  use  with  their  members.  As  I 
have  already  indicated,  we  are  trying  to  gather  from  them  the  forms 
of  procedure  which  they  in  fact  use.  But  all  we  ask  is  that  they  send 
a  ballot  which  represents  the  business  sentiment  in  their  organiza- 
tion, and  that  they  adopt  a  foi-m  best  cak-ulated  to  gather  that  senti- 
ment. AVe  do  not  want  a  baHot  that  does  not  represent  real  business 
sentiment.  We  discourage  it.  If  we  ]<now  it  does  not  represent  that 
we  do  not  record  it. 

Mr.  Edmonds.  The  system  that  was  evidently  adopted  by  the  San 
Francisco  Chamber  of  (^onnnerce  was  this:  They  evidentl}^  referred 
this  bill  to  a  committee,  because  I  see  it  says  here,  "  Recommendation 
of  the  foreign  trade  and  maritime  affairs  and  harbor  connnittees  of 
the  San  Francisco  Chamber  of  Commenie  in  joint  session."  Noav^ 
this  is  the  recommendation  that  he  speaks  of,  and  it  probably  was 
referred  to  a  special  committee,  and  the  committee,  ha^•ing  studied 
the  matter,  told  the  members  that  they  thought  this  w^as  the  right 
way  to  vote,  but  gave  them  the  opportunity  to  vote  any  way  they 
pleased.  And  they  had  that  opportunity  on  the  other  side  of  the 
page.  And  therefore  Mr.  Jacol)'s  statement  that  it  only  expressed 
the  sentiment  of  one  or  two  members  was  not  correct? 

Mr.  Rhett.  Not  at  all.  In  that  case,  for  instance,  they  apparently 
selected  a  committee  of  their  members  who  are  familiar  with  mari- 
time affairs  and  ship})ingat  San  Francisco,  and  men  in  whom  they  had 
confidence.  They  seem  then  to  have  asked  this  committee  to  investi- 
gate the  questions  presented  to  the  referendum  and  to  give  them  the 
benefit  of  their  ^•iews.    The  committee  of  the  San  Francisco  Chamber 


REGULATOEY    FEATURES    OF    SHIPPING    BILL.  153 

of  Commerce  seems  to  have  submitted  a  report  to  its  organization,  and 
their  report  and  its  reconmiendations  seem  then  to  have  been  phiced 
before  all  the  meml)ers  of  the  organization  that  they  might  express 
their  individual  approval  or  disapproval  of  the  point  of  view  ex- 
pressed. It  seems  to  me  that  that  is  a  very  intelligent  way  to  handle 
such  a  matter.  The  San  Francisco  chaml)er  seems  to  have  given  its 
members  the  benefit  of  this  report,  but  they  were  not  precluded  from 
voting  the  opposite  way.  In  fact,  the  business  of  Congress  is  handled 
that  way;  a  committee  investigates  and  makes  its  report,  and  Con- 
gress can  adopt  it  or  not,  as  it  sees  fit. 

Mr.  EdiMoxos.  In  other  words,  they  do  the  Avork  in  a  businesslike 
manner. 

Mr.  KiiErr.  I  think  the  method  adopted  at  San  Francisco  would 
seem  to  be  very  well  calculated  to  bring  fair  results,  although  I  do 
not  at  the  moment  know  what  results  it  actually  had  in  the  instance 
in  question. 

Mr.  Edmoxds.  'Sir.  Jacobs  made  the  statement  that  one  or  two  peo- 
ple ran  all  these  organizations,  as  near  as  I  can  remember  the  gist  of 
his  testimony. 

Mr.  IviiK'n\  By  way  of  repeating  that  statement,  gentlemen,  I  can 
tell  you  an  incident  in  my  own  chamber,  at  Charleston,  where  a  mat- 
ter was  up  and  the  president  was  in  favor  of  it.  He  selected  a  com- 
mittee of  12  to  pass  on  it.  After  they  had  discussed  it,  11  voted 
against  the  president.  This  incident  shows  that  any  general  state- 
ment of  the  kind  you  have  mentioned  is  not  sound. 

I  know  that  at  first  the  referenda  of  the  United  States  Chamber 
of  Commerce  were  not  considered  as  cai'efully  as  they  are  now.  It 
was  not  realized  Avhat  value  they  had.  Xow  I  think  that  our  organi- 
zations are  very  much  more  careful  in  sending  us  a  ballot  to  see 
that  it  represents  business  sentiment.  Otherwise,  the  comeback  on 
them  would  be  considerable.  Their  own  members  get  after  them.  In- 
quiries are  made  from  all  over  the  country"  about  these  referenda,  and 
therefore  each  time  we  send  out  a  referendum  there  is  more  care  ex- 
ercised to  return  to  us  the  sentiment  of  the  business  men  of  the  or- 
ganizations. 

Mr.  P2dm()Nds.  He  says  that  only  one-fifth  of  the  members  re- 
sponded. 

Mr.  IviiETT.  If  you  take  the  vote  of  San  Francisco,  for  instance  (I 
do  not  know  what  the  recommendations  of  the  San  Francisco  cham- 
ber's committee  were) ,  they  voted  "  No  "  on  the  first  three  propositions 
and  "Yes"  on  the  fourth.  Voting  such  as  that  indicates  considera- 
tion of  the  questions  presented.  They  must  have  handled  the  refer- 
endum fairlv  intelligently.  They  did  not  merely  follow  recommen- 
dations that  were  made  by  our  connnittee.  They  voted  ""  Xo  "  on  the 
first  proposition,  which  was  the  purchase  by  the  Government  of  ves- 
sels, together  with  their  o})eration:  they  voted  "  Xo ''  on  the  second 
proposition,  which  was  Government  ownership  of  vessels,  Avith  ope- 
ration by  private  parties  under  lease;  they  voted  "  Xo"  on  the  third 
proposition,  which  Avas  subsidy ;  they  voted  "  Aye  "  on  subvention ; 
they  voted  "  Xo  "  on  the  first  recommendation  of  our  committee.  Avhich 
Avas  the  shipping  board;  they  A'oted  "  Xo  "  on  the  second  j)ro])osition 
of  our  committee,  Avhich  was  for  the  Government  to  subscribe  to  the 
entire  stock  of  a  marine  development  company;  they  voted  *'  Yes ''  on 
the  third  proposition,  which  Avas  the  ocean-mail  hnv :   they   voted 


154  EEGULATORY    FEATUEES    OF    SHIPPING    BILL. 

"  No ''  on  the  fourth  proposition,  ^vhic'll  was  deferred  rebates  and 
regulation  of  rates;  and  tliey  voted  '"  Xo "'  on  the  fifth  proposition, 
wliich  Avas  Federal  licenses. 

It  looks  to  me  as  if  the.y  nnist  have  gone  over  the  questions  very 
carefully.  They  certainly  did  not  follow  recommendations  of  our 
committee. 

iMr.  RowE.  They  did  not  follow  j^our  recommendations? 

Mr.  RiiETT.  They  certainly  did  not. 

Mr.  Greene.  It  was  not  that  he  was  complaining,  as  I  understand, 
but  Mr.  Jacobs  stated  before  the  committee  you  must  not  pay  any 
attention  to  the  chamber  of  commerce,  because  it  don't  amount  to 
anything,  but  pay  attention  to  Mr.  Jacobs. 

Mr.  Rhett.  I  know  it  is  our  constant  study  to  get  the  organiza- 
tions not  to  send  us  in  ballots  until  they  have  tested  out  thoroughly 
the  method  they  think  best  calculated  to  get  the  business  sentiment 
of  their  community. 

Mr.  EDM0^•DS.  It  is  a  matter  of  record  that  only  one-fifth  of  the 
San  Francisco  chamber  voted,  which  is  but  natui-al,  because  probably 
only  one-fifth  of  the  members  were  interested  in  the  ship  matters; 
and  when  a  man  is  interested  in  a  question  he  pays  more  attention  to 
those  things  than  the  man  who  is  not.    I  have  found  that  out. 

Mr.  Rhett.  That  is  so.  You  can  not  get  a  full  vote  and  never  can; 
but  there  are  usually  men  in  each  community  who  have  the  respect 
of  the  community  and  in  whom  the  community  have  confidence  who 
study  these  questions — merchant  marine,  for  example— and  the  rest 
of  the  community  will  follow  them  the  same  way  they  will  expect  to 
be  followed  on  questions  with  which  they  are  familiar. 

The  Ciiair:max.  I  think,  if  you  will  read  INIr.  Jacob's  testimony  of 
the  manner  in  which  the  referendum  was  taken,  that  you  will  find 
there  is  no  material  difference  between  the  two. 

Mr.  Rhett.  I  tell  you,  gentlemen,  we  are  constantly  studying 
means  of  making  the  results  of  our  referenda  truly  representative 
in  any  v^ay  they  ma}^  be  shown  to  be  defective. 

Mr.  Edmokds.  I  understood  Mr.  Jacobs  to  contend  the  chamber  of 
commerce  vote  did  iiot  really  i-epresent  the  sentiment  of  the  business 
interests. 

The  Chairman.  He  said  he  took  a  refei-endum  himself,  with  a  dif- 
ferent result.    Just  how  he  took  it  I  do  not  knoAV. 

Mr.  Edmonds.  He  did  that  in  his  canneries  association,  did  he  not? 
"  In  our  association,"  he  said. 

The  Chairman.  No.    This  is  what  he  said : 

I  tested  that  by  sending  out  a  letter  myself  to  the  nieinhers  of  our  local 
chamber  of  commerce  and  the  answers  received  by  the  chamber  of  commerce 
itself  was  between  500  and  GOO  out  of  3J00  menibei-s.  T  got  over  SOO  answers 
diret-tly  opposite  to  the  i-efereiidum  that  the  chiimber  of  commerce  took,  but  I 
did  not  suggest  how  they  should  answer  the  questions. 

Mr.  Hardy.  Then  he  filed  with  the  committee,  as  I  understand, 
the  recommendations  under  w'hich  the  chamber's  referendum  was 
made. 

The  Chairman.  I  do  not  see  any  objection  to  the  manner  in  which 
the  referendum  was  taken  by  the  San  Francisco  Chamber  of  Com- 
merce, as  far  as  that  is  concerned. 

Mr.  Edmonds.  That  is  Avhat  I  wanted  to  bring  in,  because  that  is 
the  way  I  took  it. 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  155 

The  Chairman.  He  said  their  executive  committee  had  investi- 
gated it  and  filed  their  recommendations. 

Mr.  Edmonds.  That  Avould  be  a  natural  thing  for  a  committee  to  do. 

The  C'liAiRMAX.  I  say,  I  do  not  see  any  objection  to  that. 

Mr.  Ehett.  Mr.  Chairman,  will  that  be  put  in  the  record.  We 
would  like  very  much  to  investigate  that,  because  that  is  of  very 
vital  importance  to  us.  We  Avant  to  know  hoAV  these  things  are 
taken. 

Mr.  Hardy.  I  have  another  thing  also,  Mr,  Rhett.  I  have  a  let- 
ter— I  can  not  recall  the  name  of  the  man  now — of  some  gentleman 
who  was  invited  to  address  the  members  of  the  Chamber  of  Com- 
merce of  San  P^rancisco,  and  when  he  wrote  them  that  he  wanted 
to  talk  on  the  question  of  free  ships,  they  advised  him  not  to  make 
any  talk  there,  and  he  did  not  go.     I  have  that  letter. 

Mr.  IvHETT.  Any  information  that  you  gentlemen  can  give  will  be 
a  very  great  favor  to  us.  All  we  are  trying  to  get  is  the  business 
sentiment.  We  are  simply  trying  to  get  the  business  men  to  study 
these  questions,  and  to  give  you  the  benefit  of  their  views.  If  you 
can  help  us  along  that  line  by  referring  to  us  any  of  these  letters, 
they  will  be  investigated,  and  they  will  be  very  helpful  to  us. 

Mr.  Hardy.  I  am  satisfied  that  your  purpose  is  to  get  the  organi- 
zation's attitude  on  the  questions  you  are  trying  to  solve. 

Mr.  Rhett.  That  is  all. 

Mr.  Hardy.  But  I  believe  you  agree  with  Mr.  Jacobs,  that  a  com- 
mittee selected  for  their  knowledge,  making  recommendations  as 
to  how  they  should  vote,  Avould  have  very  great  weight  in  determin- 
ing how  those  who  were  not  posted  should  vote  ? 

Mr.  RiiETT.  Yes. 

The  Chairman.  As  INIr.  Rhett  says,  we  are  investigating  questions 
here  now,  and  we  make  recommendations  to  Congress,  and  they  have 
great  weight,  because  v^'e  investigate  them  thoroughly. 

Mr.  Hadley.  That  is  the  policy  on  which  the  parent  organization 
proceeds,  as  I  understand,  and  if  it  is  not  Avorth  anything,  it  had 
better  go  cut  of  business;  and  that  is  the  policy  that  the  San  Fran- 
cisco Chamber  of  Commerce  pursued,  as  the  record  now  shows. 

Mr.  Hardy.  That  is  a  matter  for  argument  as  to  how  much  a  refer- 
endum is  Avorth,  Avhen  the  vote  is  guided  by  suggestion. 

The  Chairman.  The  matter  arose  originally  on  an  inquiry  how 
these  referendums  were  taken.  It  developed  that  some  chambers 
of  commerce  referred  referendum  No.  9  to  an  executive  committee 
or  some  other  committee  and  that  committee  would  send  in  their 
report  as  the  report  of  that  body  to  the  Chamber  of  Commerce  of 
ihe  United  States,  and  the  referendum  Avas  not  put  to  the  members 
of  the  local  chamber  at  all.     That  is  true  in  some  instances? 

Mr.  Rhett.  Yes. 

The  Chairman.  Mr.  Benjamin  J.  Rosenthal  testified  before  this 
committee  that  they  have  S.OOO  or  more  members  of  their  asso- 
ciated commercial  bodies  in  Chicago,  and  that  two  men  considered 
and  reported  for  those  people,  and  the  body  of  the  organization  never 
expressed  any  opinion  at  all.    You  are  trying  to  correct  that,  I  know. 

Mr.  Rhett.  We  are  trying  to  correct  any  such  ])rocedure.  We 
have  a  tabulated  statement  here  shoAving  the  manner  in  Avhich  de- 
cisions Avere  reached  by  the  organizations.  A  few  chambers  did  it 
that  Avay — but  very  few.     We  are  not  trying  to  dictate  to  these 


156  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

chambers  any  particular  form:  we  are  merely  askin^;  that  they  use 
a  form  that  will  best  express  the  business  sentiment  of  the  com- 
munity. If  we  have  a  form  sent  in  that  we  think  does  not  do  so 
we  send  it  back  and  tell  them  we  do  not  w^ant  a  report  of  any 
officers  or  any  small  clique  amongst  them,  but  we  w  ant  a  report  that 
Avill  express  the  sentiment  of  their  business  conununity.  and  we 
Avant  to  know  how  they  are  attempting  to  get  it.  Then  we  send  out 
the  result  to  nil  the  members,  in  order  that  they  may  see  how  the 
others  do  it. 

Mr.  Hadi.kv.  How  many  organizations  did  you  say  did  it  that 
way? 

Mr.  Khett.  There  were  11  organizations,  for  which  the  executive 
officers  undertook  to  act  in  referendum  0. 

Mr.  Hadley.  What  were  the  total  number  of  reports  on  this 
referendum  t 

Mr.  KnETT.  The  total  reports  Avere  -isl.  and  11  voted  by  their 
executive  officers. 

Mr.  GuEENE.  I  am  Aery  Avell  ac<iuainted  Avith  Mr.  Fahey,  Avho  pre- 
ceded yon.  I  kneAV  him  before  he  was  elected  president  of  your 
chamber  as  a  ncAvspaper  man  in  Boston  for  years;  he  Avas  a  man  of 
very  high  standing  and  character,  and  I  think  he  did  great  Avork  as 
president  of  your  chamber  of  commerce. 

Mr.  KHfrrT.  I  am  trying  to  pursue  his  footsteps  as  near  as  possible. 

Mr.  Greene.  1  knoAv  you  are.  My  (juestions  were  not  in  criticism. 
They  Avere  rather  in  defense  of  the  Avork  you  have  done,  because  some 
men  haA'e  made  statements  before  this  committee  in  criticism  of  the 
Avork  you  have  done,  Avhich  I  did  not  think  Avere  justified. 

Mr.  Rhett.  AVe  Avill  Avelcome  any  suggestions,  gentlemen.  All  we 
Avant  to  do  is  to  give  you  the  benefit  of  the  business  sentiinent  of 
this  country,  as  far  as  Ave  can,  and  any  suggestions  to  the  effect  that 
Ave  are  not  doing  it  along  the  right  lines  Avould  be  promptly  con- 
sidered. 

The  Chairman.  AVe  are  very  much  obliged  to  you,  INIr.  Khett,  for 
coming  here  to-day. 

I  have  a  letter  here  from  Duncan  N.  Hood,  South  American  repre- 
sentative of  the  Hill  Publishing  Co.,  Hill  Building,  NeAV  York,  re- 
ferring to  his  trip  to  South  America,  the  conditions  there,  and  the 
present  ocean  freight  rates.  If  there  is  no  objection,  I  Avould  like  to 
have  it  go  in  the  record. 

(The  letter  above  referred  to  is  as  follows:) 

llll.i.    I'llil.isii  INC   Co.. 

.V(  /r    Vo;7,-.  .1/-///    /N.   I'.Uiu 

11(111.    Jo.SHf.V    \V.    .Xl.KXA.XDKK.    .M .    ( '.. 

('li(iiniia)i  UoUNC  of  h'cijrcxoilnlin  s  Coiin/iitlcc 

on  Mcrcliotit  Marine  (tiid  Fisli(ri(s.   Wdsliiin/hni.  I).  <'. 

Dear  Sir:  I  have  .just  ivtunuvl  I'l-oiu  an  IS  niontlis"  trip  ilinniiili  South 
Aincricii  i'oi-  the  purpose  of  ivporl  iiij;-  on  romlil  ions  in  lliosc  markets  for  Auiori- 
can  iiiaiiufaclurcrs  and  our  advertisers. 

AVe  have  succeeded  in  iiiipressiii;;-  our  inanufacl  nrers  witli  tiH>  impoitance  of 
trying  to  jiet  as  much  as  jiossilih-  of  Soutli  Anierica's  1.2(Kt  million  dollars 
yearly  imports,  as  this  would  mean  a  ."o  ](er  cent  increase  in  our  export.s.  if 
we  get  all  of  it. 

In  fact,  one  of  our  advertisers  who  formerly  did  a  husiness  of  .S;S.000  a  year 
is  now  doing  a  liusiness  in  P.razil  alone  of  .i?;*,7."i.0it0. 

In  spite  of  all  that  has  ln'cn  done  so  succt'ssfully  thus  far.  we  are  ahoul  to 
lo.se  almost  all  our  traile  there  unless  soinethiug  is  done  immediately  lo  relieve 
the  situation. 


REGULATORY    FEATURES    OF    SHIPPING    BILL. 


157 


Prior  to  the  war  frtM;j,iit  ratt's  to  I{ueiio>i  Aires  were  iihout  $4  a  ton.  'I'lie 
averaj;;e  piircliase  pi-ice  of  a  freiiiiit  steamer  is  about  .$.")(»  jter  ton.  Ueceiit  rales 
liave  aetiially  readied  S;."»L'.r)(»  ju-r  ton.  ami  this  was  jiaid  )>ecanse  it  was  abso- 
lutely necessary. 

So  that  frei.irht  rates  for  a  single  .'?(>-(lay  trip  aiv  now  greater  than  tlu'  i)>ir- 
ehase  price  of  the  steaniei-s  before  tlie  wai'. 

If  we  fail  tf)  shi]!  now.  Soutli  America  will  lie  conii)elle(i  to  manufacture 
tiiere  what  they  now  Imy  fi-om  us.  and  tliat  market  will  be  lost. 

So  tliat  inmiedlate  and  jironi])!  aclion  is  imperative. 

Anything  within  our  .iui'isdiction  thiit  floats  should  be  consider(>d  in  the 
]>lans  for  establishinti-  marine  lines  from  here  to  South  America  at  normal 
frei.uht  rates.  Interned  steamers,  coastwise  vessels  whose  carjio  can  be  han- 
<lled  by  the  i-ailroads,  naval  colliers.  Army  transi)orts.  and  some  other  naval 
ves.sels  should  be  impressed  into  service  innuediately. 

An  emeruency,  if  n(»t  a  (Jovei-nment  merchant  marine,  anythini;'  at  all  will 
do  that  will  enable  Amei'ican  manufacturers  to  shiit  I  lie  orders  now  held  u[* 
by  the  freight  condition. 

We  have  no  interest  in  this  in  any  way  except  to  help  our  adx-ertisers  and 
American  manufacturers. 

Please  bi-ing  this  matter  before  your  connnittee  and  see  that  remeclial  legis- 
lation is  pas.sed. 

Y<uirs.  vei\v  truly, 

DixcAX  N.  Hood, 
Sijiitli  AiiKiicdii  RcjirvscHtiiilrc. 

Mr.  RowE.  Mr.  Chninnnn.  Aviien  Mr.  Sherman,  vice  president  of 
tlie  W.  E.  Grace  Co.,  was  before  the  committee,  some  one  requested 
him  to  give  us  a  detailed  statement  of  the  diiference  in  cost  of  opera- 
tion of  simihir  vessels  under  the  American  flag  and  the  British  flag, 
and  I  have  here  a  letter  sent  by  another  vice  president  of  the  W.  R. 
Grace  Co..  which  I  wotdd  like  to  have  \)\\i  in  the  record. 

The  Chairmax.  If  there  is  no  objection,  the  letter  will  be  printed 
in  the  record. 

(The  letter  above  referred  to  is  as  follows:) 

New  Yokk.  .1/>///   IU,  1!)10. 

Hon,    JOSHIA    W.    Al.KXAXDEK, 

Conniiitlcc  on   McrclKiiif  Marine  and  FiHlirricff. 

llouxc  of  R('i)rcsciitatircs,   Wafdiiiij/toii.   J).   ('. 
I>EAK  Sir:  In  reference  to  your  inquiry  to  our  Mr.  L.  H,  Sherman,  we  beg 
to  advise  that  we  have  been  operating  American  and  British  steamei-s  side  by 
side  for  some  years,  and  we  have  made  diffei-ence  in  cost  of  oj)eration  (on  same 
size  boat)  to  be  as  follows: 


American 
(per  month). 


British 
(per  month). 


ages. 


AV 

Vietuallin; 

American  steamers  require  aimual  inspection,  while  British  steamers  are 
inspected  each  four  years;  estimated  extra  cost  by  reason  of  annual  inspection. 


$1,970 
.S03 


$1,342 
649 


or.  say,  .$807  extra  ytev  month  for  American  boat. 

The  extra  cost  of  victualling  is  not  by  statute,  but  by  reason  of  less  economy 
on  American  steamers. 

(Ml    P>ritisli   steamers,   which   we   recently   triinsferred   to   American   flag,   the 
foreign  crews  struck  for  American  wages  the  da.v  of  transfer  and  received  them. 
On  same  size  boat  as  referred  to  above  the  crew  under   Ilrilisli   Hag  was  ;^3 
men,  and  the  crew  under  Amei'ican  flag  was  Hd  men. 
Yours,  very  truly, 

W,   U.  (JliACE  &  Co., 
I),  MriH.  \  ice  I'naidciit. 

(Thereupon,  at   \L'M)  o'clock   a.   m..  the  committee  adjourned  to 
Friday,  April  21.  llUC.  at  10.80  o'clock  a.  m.) 


158  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

COMMI  TTEF,  OX   THE  jSIekCHANT  MaHINE  AND   FiSllEKIES, 

House  of  Repi{esentatives, 

Saturday^  April  '22,  1016. 
The  conmiittee  met  at  10.30  o'cloclc  u.  m.,  Hon  J.  W.  Alexiinder 
(chairman)  presiding. 

The  CuAiitMAN.  AA'e  have  present  this  morning-  gentlemen  repre- 
senting, one  of  them  iSeattle.  another  San  Francisco,  and  another 
Los  Angeles.  "W'e  Avill  be  glad  to  hear  them  with  reference  to  House 
bill  14337. 

STATEMENT  OE  MR.  SETH  MANN,  REPRESENTING  THE  SAN  FRAN- 
CISCO CHAMBER  OF  COMMERCE,  SAN  FRANCISCO.  CAL. 

The  CiiAULArAX.  Please  tell  the  committee  who  you  are,  what  3'our 
profession  is,  and  what  your  relations  are  to  the  San  P^rancisco 
Chamber  of  Commerce. 

]Mr.  Manx.  iMr.  Chairman  and  gentlemen  of  the  committee,  I  am 
the  attorney  and  manager  of  the  traffic  bureau  of  the  San  Francisco 
Chamber  of  Commerce.  I  am  also  the  president  of  the  Pacific  Coast 
Traffic  League,  w  hich  is  an  organization  composed  of  the  traffic  man- 
agers of  the  various  conunercial  bodies  or  civic  institutions  repre- 
senting cities  and  conunercial  communities  within  the  States  of  Cali- 
fornia, Oregon,  and  Washington  situated  west  of  the  Sierra  Nevada 
and  Cascade  Mountains,  and  thus  it  deri\es  its  name,  the  Pacific 
Coast  Traffic  League.  It  has  been  organized  in  this  way  so  that  we 
shall  have  in  our  membership  not  the  representatives  of  any  particu- 
lar line  of  business  or  of  any  particular  interests,  but  only  those  rep- 
resentatives Avho  represent  all  the  interests,  as  traffic  managers  or 
traffic  officials  representing  shippers  and  commercial  communities 
must  do  when  they  are  engaged  in  their  work,  which  is  a  work  that 
means  the  taking  into  consideration  of  all  interests  and  not  any 
particulai-  interest  to  the  exclusion  of  others. 

The  Pacific  Coast  Traffic  League  in  Jamuiry  met  in  San  Fran- 
cisco, and,  among  otlier  things,  after  discussion,  adopted  resolutions 
to  the  elFect  that  they  were  opjioscd  to  any  regulation  of  freight  rates 
on  vessels  engaged  in  any  commerce.  The  San  Francisco  Chamber 
of  Commerce  has  had  under  consideration  for  some  months  past  the 
American  merchant-marine  bills,  if  I  may  so  call  them,  one  being 
H.  K.  lonoo  and  the  othei-  the  present  bill  before  this  committee,  H.  R. 
14337.  They,  pursuing  the  custom  which  they  have  adopted  on  mat- 
ters of  serimis  import,  sent  out  what  they  call  a  refeieudum  to  the 
members  of  the  chambei-.  There  are  some  3.()()0  membei\s  of  the  San 
Francisco  Chamber  of  Conunerce,  men  engaged  in  all  the  lines  of 
busine.ss  and  manufactui-c  that  are  cari'ied  on  on  the  Pacific  coast, 
including  Avholesale.  retail,  and  manufactiu-ing.  The  form  of  this 
refeiendum  is  a  printed  form  asking  cei'tain  (juestions  of  the  members 
and  giving  them  an  opportunity  to  vote  either  yes  or  no;  and  I  Avant 
fir.st.  with  your  permission,  to  convey  to  you  the  i-esults  of  this  refer- 
endum, which  was  just  recently  conununicated  to  the  chamber,  and 
wdiich  I  received  just  the  day  before  yesterday  in  the  form  of  a  tele- 
gram from  the  i)resident  of  the  San  I'^rancisco  Chamber  of  Conunerce, 
Mr.  W.  X.  Moore,  of  the  firm  of  Moore.  AVatson  &  Co.,  wholesale  dry- 


KEGUr.ATOKY    FEATUEKS    OF    SHIPPING    BILL.  159 

goods  merchants,  of  San  Francisco.  The  result  of  that  i-eferenchim 
was  as  follows:  Aoiiinst  the  construction  or  purchase  of  ships  by 
the  Goveinrnent,  8  to  1.  Those  fi^jures,  of  course,  represent  the  pro- 
portion of  the  vote  and  not  the  actual  vote. 

The  Chaiumax.  How  many  votes  were  cast?  You  say  tliei-e  are 
3,000  membei's  of  the  chaml)er  of  commerce. 

Mr.  Manx.  I  ha\e  not  that  fi^rvire.  Air.  Chairman.  It  was  not  con- 
veyed to  me  by  telea'ram.  and  that  information  had  not  arrived  at 
the  time  when  I  left  San  Francisco,  on  the  l^th  instant.  In  faxov  of 
the  alternate  sugjiestion  made  by  the  Chamber  of  Commerce  of  the 
State  of  Xew  York  eijualizing  the  building  and  operation  of  Ameri- 
can and  foreign  ships  the  vote  was  3  to  1 ;  in  favor  of  any  new  bill 
providing  merchant  marine,  the  legislation  being  so  framed  that 
ships  may  operate  under  regulations  of  the  broadest  liberality  to  meet 
ovei--sea  competition,  20  to  1. 

Mr.  Sauxders.  Does  that  include  subsich'? 

Mr.  Maxx.  You  understand  that  these  questions  were  submitted 
to  the  membership  of  the  chamber  in  this  particidar  form,  and  the 
vote  therefore  is  upon  the  questions  as  I  have  read  them. 

The  CHAiR:\rAX.  They  seem  to  realize  the  need  of  a  merchant 
marine? 

Mr.  Maxx.  That  seems  to  be  a  matter  of  general  consent. 

Mr.  Hardy.  And  has  been  for  some  years. 

Mr.  Maxx.  Yes,  sir:  and  has  been  for  some  years.  In  opposition 
to  Government  ownership  and  operation,  the  vote  was  7  to  1 ;  in  oppo- 
sition to  regulation  of  freight  rates  to  be  charged  and  collected  by  a 
ship,  5  to  1 ;  and  in  opposition  to  regulation  requirements  for  licenses 
to  vessels,  8  to  1. 

Now.  gentlemen,  within  the  brief  time  that  necessarily  must  be 
granted  in  a  matter  of  this  kind,  notwithstanding  its  importance,  I 
desire  to  confine  myself  very  largely  to  the  opposition  to  any  attempt 
to  regulate  the  rate  to  be  charged  by  vessels  operating  in  either  in- 
terstate or  foreign  connnerce.  and  first  I  desire  to  invite  your  atten- 
tion to  statements  made  before  the  Senate  Committee  on  Interoceanic 
Canals  in  the  Sixtv-second  Congress,  second  session,  on  H.  E.  219G9, 
under  date  of  March  29,  1912.  That  was  the  Panama  Canal  bill, 
and  the  hearing  was  upon  the  Panama  Canal  bill.  The  statements 
to  which  I  desire  to  refer  are  statements  of  Judge  Prouty,  a  member 
for  some  30  years  of  the  Interstate  Commerce  Commission,  and  now, 
as  you  know,  in  charge  of  the  physical  valuation  of  railroads,  Avhich 
is  being  carried  on  by  a  department  of  the  Interstate  Commerce  Com- 
mission. Judge  Prouty  had  had  occasion  for  many  years,  perhaps 
20  years,  to  examine  into  the  intermountain  situation,  as  it  is  called, 
and  the  effect  of  water  competition  between  the  Atlantic  and  Pacific 
coasts,  and  also  into  other  questions  relating  to  the  regulation  and 
the  operation  and  the  fixing  of  rates  and  fares  by  steamer  lines  in 
connection  with  rail  lines,  those  questions  being  under  the  jurisdic- 
tion of  the  Interstate  Commerce  Commission  by  the  terms  of  the  act 
to  regulate  commerce.  At  that  time  the  question  arose  with  respect 
to  the  operation  of  vessels  through  the  canal  because  the  Pacific  Mail 
Steamship  Co.  desired  to  so  operate,  notwithstanding  51  per  cent  of 
its  stock  was  owned  bv  the  Southern  Pacific  Co.     Until  within  a 


160  EEGULATORY   FEATURES   OF    SHIPPING   BILL. 

few  months  this  stock  still  remained  in  the  ownership  of  the  South- 
ern Pacific  Co..  hut  has  now  been  sold  to  W.  R.  (xrace  &  Co.  At  that 
time,  however,  r)!  per  cent  of  the  stock  of  the  Pacific  Mail  Steamship 
Co.  was  owned  bv  the  Southern  Pacific  Co.,  and  they  were  endeavor- 
ing; to  have  the  Panama  Caual  act  authorize  the  oi)erati<)n  of  those 
vessels  belontiin*;  to  tiic  Pacific  Mail  Steamship  Co.  throu<>;h  the 
Panama  Canal  when  it  was  opened  and  ready  for  business.  The 
ojiposition  of  the  Pacific  coast  and  of  the  peoj)le  of  the  Atlantic 
coast  and  of  the  central  part  of  the  United  States  a^rainst  this  opera- 
tion Avas  that  the  Panama  Canal  was  constituted,  at  least  partly,  to 
control  fi-eiofht  rates  between  the  Atlantic  and  Pacific  coasts,  or  what 
may  be  called  the  transcontinental  railroad  rates,  by  water  competi- 
tion, and  the  oi)inion  was  \igorously  and  successfully  urged  that 
railroad  comi)anies  should  not  be  })ermitted  to  own  or  control  their 
own  water  com})etition.  The  Pacific  Mail  Steamship  Co.,  supported 
by  the  Southern  Pacific  Co.,  contended  that  if  the  rates  by  vessels 
operating  through  the  Panama  Canal  should  be  put  under  the  con- 
trol and  jurisdiction  of  the  Interstate  Commerce  Commission  or  any 
other  congressicmal  power  the  difficulty  would  pass  away  and  that 
steamers  could  then  operate,  notwithstanding  that  they  were  owned 
by  raili'oads  covering  the  same  transportation  movements  between 
the  same  points,  because  the  Interstate  Commerce  Commission  could 
always  see  that  the  rates  maintained  by  those  vessels  were  rates  which 
would  not  be  railroad  rates,  but  purely  sea  rates. 

That  was  the  contention  of  the  railroad  companies  then,  and  it  has 
ever  since  been  their  contention,  and  it  is  to-day  the  desire  of  the 
transcontinental  railroads  of  this  country  to  have  the  rates  of  the 
steamers  and  vessels  operating  in  opposition  to  and  in  competition 
with  them  controlled  and  regulated  by  some  regulating  body  for 
many  reasons,  but,  among  others,  that  since  the  railroads  themselves 
are  operating  under  the  conditions  of  an  act  which  require  them  to 
i)ublish  their  rates  and  to  make  them  public  for  30  days  before  they 
go  into  effect,  they  Avant  the  same  conditions  to  apj^ly  to  tlie  carriers 
l)y  water,  which  are  the  great  natural  regulators  of  railroad  freight 
rates.  Tn  response  to  that  ])ro])ositi(m,  and  in  response  to  the  ques- 
tion of  why,  with  the  Pacific  ^Mail-Southern  Pacific  vessels  oper- 
ating thiough  the  Panauia  Canal,  the  control  of  the  Interstate  Com- 
merce Coumiission  might  not  be  invoked  and  the  first  objecticm 
]'emoved,  Mr.  Prouty,  of  the  Interstate  Conunerce  Commission,  and 
Mr.  Franklin  K.  Lane,  then  a  member  of  the  Interstate  Commerce 
Comnnssion  and  now  Secretary  of  the  Interior,  were  invited  to  come 
before  the  Senate  Committee  on  Tnteroceanic  Canals  and  make  their 
statements  with  resi)ect  to  their  investigations  and  their  opinions 
as  to  the  advisability,  and.  indeed,  the  ])racticability  of  endeavoring 
to  regulate  steamei's  at  all,  so  far  as  their  freight  lates  were  con- 
cei'ned.  I  am  now  reading  from  ])age  S()l)  of  the  I'ej^ort  I  have  just 
]eferre(l  to,  and  this  is  what  Judge  l*rout\'  said: 

T  do  not  IliiiiU  tliiil  tlic  Iiitorstntc  Commerce  Coiinnission  cnn  regulate  the 
lMH't-to-|toi-t  i-;il('s  of  a  water  cariMcr.  bocauso  tliero  is  no  hasis  for  regulation. 
We  linve  just  been  invest  i^atin^i,  in  a  case  of  wliieli  I  had  cliai'jre,  the  port-to- 
Itort  water  i-ates  fi'oni  \ew  York  to  Calvestoii.  There  is  a  very  hii'ge  volume 
of  traflic  annually  fi'om  Atlantic  seaboard  territory  to  New  York,  from  New 
York  to  (Jalveston  liy  water,  and  by  rail  from  (ialveston  to  interior  Texas  and 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  161 

Southwestern  points ;  we  liuve  l)eon  inquirini?  into  the  reusonabieness  of  those 
rates.  Now,  the  evidence  convinces  me  tlint  it  is  entirely  a  (luestion  of  con- 
ditions. If  tlie  ship  runs  full  in  one  direction  a  low  rate  can  he  made;  if  it 
runs  full  in  both  directions,  a  lower  rate  can  be  made ;  if  it  runs  lijiht,  a 
higher  rate  must  be  made  in  order  to  pay  the  expenses  of  operation.  Our  in- 
vestigation in  that  case  shows  that  60  per  cent  of  the  expense  is  at  the  dock, 
nnd  only  40  per  cent  of  the  expense  on  the  water.  The  expense,  both  at  the 
dock  and  on  the  water,  is  substantially  the  same  whether  a  full  load  is  obtained 
or  wliether  only  a  part  load  is  obtained,  except  the  cost  of  loading. 

I  would  like  to  insert  this  extract  from  the  statement  of  Mr. 
Franklin  K.  Lane  before  the  same  committee  on  the  same  subject: 

Mr.  Lane.  I  was  talking  about  the  railroads.  I  think  the  distinction  you  have 
In  mind  perhaps  is  this:  That  a  man  who  operates  a  boat  line  uses  a  highway 
that  is  already  created  for  him  by  nature,  while  a  man  running  a  railroad 
creates  a  highway  and  operates  a  machine  over  it.  Now,  the  artificial  highway, 
namely,  the  railroad,  becomes  a  monopoly.  Its  franchise  creates  it  as  a 
monopoly,  and  that  is  the  basis  for  regulation.  I  think  that,  so  far  as  the 
natural  highway  is  concerned — the  water — that  it  is  a  very  practicable  thing  to 
allow  traffic  freedom  of  competition  upon  that  ocean  highway,  whereas  it  is  not 
a  practicable  thing  to  allow  traffic  freedom  of  competition  upon  the  artificial 
highway. 

The  CHAinMAN.  Why  not? 

Mr.  Lane.  For  the  very  reason  that  if  you  do  not  control  the  railroad  you  are 
going  to  have  a  demoralization  in  the  service  and  in  the  rates ;  and  you  are 
going  to  have  the  condition  that  existed  in  this  country  25  years  ago  when  the 
railroads  were  killing  themselves.  The  act  to  regulate  commerce  is  largely  a 
measure  to  protect  the  railroads  against  themselves. 

The  Chairman.  Do  you  mean  the  intent  of  the  interstate  commerce  act  is  to 
prevent  railroads  from  competing  with  one  another? 

Mr.  Lane.  Very  largely  so.  And  to  prevent  rebates,  which  are  simply  a  means 
of  competition. 

The  Chairman.  You  talk  about  the  freedom  of  the  ocean.  Is  there  anything 
that  prevents  competing  steamship  companies  from  agreeing  upon  rates? 

Mr.  Lane.  Theoretically  there  i.s,  but  practically  there  is  not. 

The  Chairman.  Then  why  do  you  expect  this  freedom  of  competition  on  the 
ocean? 

Mr.  Lane.  Because  a  man  can  hire  a  boat  for  a  couple  of  hundred  thousand 
dollars,  or  for  a  verv  little  amount  of  money  and  put  it  on  against  a  competitor 
that  may  be  worth  $100,000,000. 

The  Chairman.  I  do  not  think  that  statement  by  Judge  Prouty 
relates  to  any  proposition  now  being  considered  l)y  this  committee. 

Mr.  Mann.  If  the  chairman  please,  it  seems  to  me  that  it  is  germane 
in  this  respect,  that  this  bill  under  consideration  does  propose  to 
regulate  and  fix  the  rates  to  be  charged  by  vessels  on  freight,  and  this 
is  a  statement,  as  I  understand  it,  against  the  advisability  or  prac- 
ticability of  doing  that  thing. 

The  Chairman.  That  is  not  a  question  that  we  are  considering 
now.  Is  there  any  objection  to  a  commission  having  charge  or  con- 
trol, so  far  as  maximum  rates  are  concerned? 

Mr.  Mann.  Yes,  sir;  and  it  is  that  very  objection.  That  is  the 
charge  they  now  have  of  railroad  rates. 

The  Chairman.  You  do  not  think  that  Congress  or  anybody 
clothed  with  powers  similar  to  the  powers  of  the  Interstate  Com- 
merce Commission  should  have  any  control  wdiatever  of  the  maxi- 
mum rates  to  be  charged  by  water  carriers  of  either  domestic  or 
foreign  commerce? 

The  Chairman.  Do  you  think  they  should  have  a  free  hand  to  do 
as  they  please? 

38534^16 11 


162  EEGULATOEY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Mann.  Let  me  say  in  that  regard,  if  the  chairman  please, 
that  there  is  no  question  that  the  legishiture  or  the  Congress  of  the 
United  States,  under  the  German  Alliance  Insurance  case,  decided 
just  a  year  or  so  ago  by  the  Supreme  Court  of  the  United  States, 
have  full  power  to  regulate  any  business  of  any  kind  or  character 
which  the  court  finds  to  be  of  a  sufficiently  public  nature  to  justify 
such  regulation,  irrespective  of  whether  it  be  a  monopoly  or  not; 
so  that  the  only  question  that  will  arise  in  this  economic  age  will  be 
as  to  whether  it  is  Avise  or  not  to  regulate  such  a  business.  The 
question  of  power  is  out  of  the  question,  because  that  is  granted. 
There  is  nothing  to  be  considered  but  the  question  of  the  advisa- 
bility of  doing  it,  and  I  am  addressing  myself  now  to  the  point  of  the 
inadvisability  of  restricting  this  shipping  business,  which  is  not 
a  monopoly,  but  which  necessarily  almost  must  be  a  private  concern 
operating  over  the  unmonopolizable  highway  of  the  sea. 

Mr.  Saunders.  As  I  understand  it,  Judge  Prouty  said  in  respect 
to  the  bill  you  referred  to  that  if  the  traffic  is  good  both  ways  lower 
rates  may  be  charged,  but  that  if  the  traffic  is  light  a  diiferent  rate 
would  be  necessary  to  ])revent  them  from  losing  money.  Now,  in 
what  way  does  that  differ  from  the  situation  of  the  railroads?  If 
a  railroad's  traffic  is  good,  one  rate  would  be  justified,  but  if  the 
railroad's  traffic,  under  particular  conditions,  is  light,  so  that  they 
would  be  running  on  half  time  and  operating  at  a  loss,  that  would 
be  taken  in  consideration  in  determining  what  was  a  fair  and  reason- 
able rate  to  the  railroad  ? 

Mr.  Mann.  That  same  question  was  asked  Judge  Prouty;  may  I 
read  his  answer? 

Mr.  Saunders.  Yes ;  I  woidd  like  to  have  an  answer  to  it. 

Mr.  Mann.  Now,  having  in  mind  that  what  Judge  Prouty  said  is 
in  answer  to  your  question,  I  will  read.     He  said : 

Now,  when  you  inquire  wliat  is  a  roasonalile  rate  on  a  railroad  you  have 
something  to  jiuide  you.  You  have  other  railroads;  you  know  about  the  cost 
of  other  railroads;  you  know  about  the  cost  of  oi)eration ;  you  know  about  the 
density  of  the  tratfic ;  you  can  institute  a  comparison  between  that  railroad  and 
similar  railroads.  But  all  those  distinctions  fail  when  you  undertake  to  inquire 
what  is  a  reasonable  rate  on  the  water. 

Mr.  Saukders.  Does  that  appeal  to  you  ?  Do  those  distinctions 
seem  to  you  to  be  sound? 

Mr.  Mann.  Yes,  sir. 

The  Chairman.  Is  that  tlic  basis  on  which  they  make  rates  or  de- 
termine what  is  a  reasonable  rate  on  a  railroad? 

Mr.  Mann.  Yes,  sir;  very  largely,  and  I  have  been  bringing  those 
cases  before  the  commission  for  15  years.  I  have  been  bringing  cases 
before  the  commission  involving  the  reasonableness  of  rates.  I  have 
brought  them  both  l^efoi-e  the  Interstate  Commerce  Commission  and 
before  the  railroad  counnission  of  the  State  of  California.  We  pro- 
duce the  best  evidence  we  can  get  as  to  tlie  rates  charged  under  simi- 
lar circumstances  and  conditious,  either  l)y  thi^'^  same  or  other  rail- 
roads; or,  rather,  bv  the  same  or  similar  railroads. 

The  Chairman.  Take,  for  instance,  the  lines  from  Kansas  City  to 
San  Francisco;  take  the  Santa  Fe,  the  Hock  Island,  the  Burlington, 
and  tlie  Union  Pacific;  do  they  have  different  rates  from  Kansas 
City  to  San  Francisco  upon  the  same  commodities? 

Mr.  Mann.  They  are  practically  the  same  rates. 


BEGTJLATOEY    FEATURES    OF    SHIPPING   BILL.  163 

The  CiiAimiAx.  But  there  is  a  difference  in  the  cost  of  the  con- 
striiction  of  those  roads? 

Mr.  Mann.  Competition  goA^erns  there. 

The  Chairman.  Do  they  all  have  the  same  rates? 

Mr.  Mann.  They  do  on  the  same  business. 

The  CiiATiniAN.  The  net  profit  to  the  different  roads,  then,  de- 
pends upon  the  difference  in  the  cost  of  construction,  operation,  and 
maintenance,  does  it  not?  In  other  words,  one  road  can  perform  tlie 
same  service  and  have  a  greater  profit  than  another  road  by  reason 
of  the  difference  in  those  factors — that  is,  the  difference  in  the  cost  of 
construction,  maintenance,  and  operation? 

Mr.  Mann.  Yes,  sir. 

The  Chair:man.  Then  the  rates  are  not  determined  on  that  basis, 
are  they? 

Mr.  Mann.  Xot  always.  This  distinction  must  be  kept  in  mind 
with  respect  to  rate  regulation  or  any  other  kind  of  regulation,  and 
that  is  the  distinction  Ijetween  a  reasonable  rate,  or  a  rate  which  the 
public  utlility  is  entitled  to  receive,  which  includes  a  fair  return  upon 
its  investment,  that  being  a  rate  which  the  regulating  body  can  fix 
as  the  maximum,  and  that  other  very  large  body  of  rates,  which  may 
perhaps  be  larger  than  the  one  I  have  just  mentioned,  and  which  are 
fixed  by  reason  of  business  conditions,  the  rules  of  political  economy 
and  the  law  of  supply  and  demand,  and  which  may  be  condensed  into 
the  one  word  "  competition."'  That  is  something  which  presents  itself 
in  this  way  to  the  public  utility :  "  You  can  take  this  business  or  leave 
it,  but  if  you  take  it  you  must  take  it  upon  a  competitive  basis,  and 
if  you  want  to  handle  it  on  your  rails  you  must  make  a  rate  that  will 
carr}^  it  by  rail  under  competitive  conditions."  Under  that  com- 
petitive  system  the  rate-making  regulative  body  is  not  in  the  position 
of  fixing  the  maximum  rate,  but  of  permitting  the  public  utility  to 
charge  less  than  a  reasonable  rate.  There  are  two  methods  of  fixing 
rates.  One  is  to  order  a  maximum  rate  and  one  is  to  permit  the 
charge  of  a  less  than  reasonable  rate. 

Mr.  Saunders.  For  the  purpose  of  illustration,  take  the  case  cited 
by  Judge  Prouty  of  traffic  moving  between  Galveston  and  New  York, 
and  let  us  see  if  the  difficulty  suggested  by  Judge  Prouty  is  a  real 
one.  Now,  in  the  case  of  a  line  plying  between  New  York  and  Gal- 
veston, so  far  as  rail  competition  is  concerned,  the  competition  would 
be  with  railroad  systems  that  are  operating  under  fixed  regulations. 
That  is  true,  is  it  "not?  The  railroad  systems  with  which  the  ships 
would  compete  are  operated  under  fixed  regulations  prescribed  by 
the  Interstate  Commerce  Commission,  are  they  not  ? 

Mr.  Mann.  Not  entirel}^  so,  so  far  as  the  rates  are  concerned. 

Mr.  Saunders.  Who  else  controls  them? 

Mr.  Mann.  The  law  of  supply  and  demand  and  the  law  of  compe- 
tition. 

Mr.  Saunders.  The  freight  rates  are  fixed  by  the  Interstate  Com-. 
merce  Commission:  they  have  the  right  to  fix  them,  and  they  are 
net  modified  by  the  law  of  supply  and  demand,  are  they? 

Mr.  Mann.  Yes,  sir. 

Mr.  Sauisders.  Can  they  change  a  rate  fixed  by  the  Interstate  Com- 
merce Commission  under  the  law  of  supply  and  demand? 

Mr.  Mann.  By  permission  of  the  Interstate  Commerce  Commissioii 
they  can. 


164  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Saunders.  That  goes  back  to  what  I  said — they  are  operating 
under  fixed  regulations  prescribed  by  the  authority  oi'  the  Interstate 
Commerce  Commission. 

Mr.  Manx.  Either  by  order  or  permission. 

Mr.  Saunders,  llien  what  difference  does  that  make? 

Mr.  Mann.  Because  one  rate  is  a  reasonable  rate,  the  other  a  less 
than  reasonable  rate 

Mr.  Saunders  (interposing).  But  under  the  law  it  is  permissive 
or  prescriptive  by  the  Interstate  Commerce  Commission  ? 

Mr.  Mann.  Yes,  sir. 

Mr.  Saunders.  Xow,  having  in  mind  that  they  are  operating  in 
competition  with  a  regulated  system  of  transportation,  and  having 
in  mind  what  can  be  ascertained  by  the  tribunal  in  respect  to  water 
traffic,  and  having  in  mind  what  can  be  readily  ascertained  as  to  the 
cost  of  handling  the  traffic,  and  having  in  mind  what  can  be  ascer- 
tained in  respect  to  the  cost  of  the  ship,  and  having  in  mind  the 
chances  of  loss,  tell  me  why  a  tribunal  with  the  means  for  ascertain- 
ing all  of  those  facts  can  not  prescribe  a  maximum  rate  that  would 
be  fair  to  all  concerned  ? 

Mr.  Mann.  In  the  fiist  place,  the  investment  in  one  railroad  is 
very  much  the  same,  generally  .^peaking,  as  it  is  in  another.  It 
costs  about  as  much  to  construct  1  mile  of  mountain  railroad  on  one 
line  as  on  another,  and  it  costs  about  the  same  amount  to  construct 
a  mile  of  railroad  over  a  level  country  upon  one  line  as  on  another 
line,  and  it  costs  just  about  as  much  to  buy  a  box  car  for  one  road 
;  s  it  does  to  buy  the  .a me  kind  of  box  car  for  another  road.  The 
same  thing  is  true  with  reference  to  locomotives,  general  expenses, 
and  the  wages  of  train  crews,  and  the  operating  conditions  are  sub- 
stantially the  same  on  one  road  as  on  another.  The  initial  invest- 
ment; however,  is  very  large  on  any  large  or  controlling  railroad 
system.  We  will  say  that  $300,000,000  will  represent  the  minimum  or 
the  a\erage  investment  in  the  construction  of  a  line  from  Chicago 
to  the  Pacific  coast.  Xow.  the  railroad  is  entitled  to  receive  a  re- 
turn upon  its  investment,  and  its  investment,  we  will  sav,  is 
$300,000,000. 

jNIr.  Salndehs.  A  reasonable  i)rofit  to  the  i)eople  who  put  their 
money  in 

Mv.  Mann  (interposing).  'J'hey  are  entitled  to  a  reasonable  return 
upon  the  investment.  Xow,  a  shipowner  is  entitled  to  a  reasonable 
return,  and  the  question  is,  What  is  the  investment?  Suppose  I  own 
a  ship  and  you  own  a  ship.  My  ship  may  cost  only  half  as  much 
us  you  IS,  or  yours  may  cost  ten  times  as  much  as  mine.  Mine  may  be 
a  ship  of  1,000  tons  burden,  while  yours  may  be  a  ship  of  10,000  tons 
bui-den ;  my  ship  may  cost  $100,000,  while  yours  may  cost  $1,000,000. 
Therefore  my  initial  investment  is  only  one-tenth  of  yours.  Then, 
Avhen  you  make  a  voyage  l)etween  two  ]:)oints — and  it  makes  no  dif- 
ference what  two  points  they  are  or  what  you  ma}'  do — you  have  got 
to  have  your  whole  ship  along  with  you.  That  is  another  considera- 
tion. Xow.  if  I  am  I'unning  a  railroad,  if  I  have  only  got  a  train 
of  20  loaded  cars,  although  I  could  haul  40  loaded  cars,  I  can  leave 
20  empty  cars  at  the  depot  and  handle  only  my  train  of  20  cars.  But 
if  I  am  going  to  operate  a  ship,  I  can  not  leave  half  of  my  ship 
behind. 


EEGULATOEY    i-'EATUEES    OF    c;HlPPl^'G    BI1,L.  165 

The  Chair^ian.  Yon  sav  there  would  be  a  difference  in  the  cost  of 
the  operation  of  the  raih-ond  in  carryinir  a  less  number  of  cars? 

Mr,  Manx.  Yes,  sir. 

The  Chairman.  So  there  is  an  econoni}-  in  leaving  off  20  cars? 

Mr.  Manx.  Yes.  sir. 

The  Chairman.  The  saving  would  not  be  much. 

Mr.  Mann.  Of  coui-se,  that  is  a  matter  of  figures,  and  it  can  be 
demonstrated.  A  i-ailroad,  of  course,  does  not  save  onedvalf  of  the 
expense  by  operating  20  cars  instead  of  40,  but  they  do  save  a  great 
deal  by  not  having  to  move  20  empty  cars.  Furthermore,  the  einpty 
cars  not  moved  in  that  train  may  be  used  to  load  in  another  train. 

Mr.  Saunders.  Having  in  mind  all  those  considerations  and  fac- 
tors which  you  have  mentioned,  which  are  entirely  proper,  the  men 
who  have  their  money  invested  in  shipping  can  tell  whether  they  are 
making  money  or  not. 

The  Chairman.  It  takes  the  same  engine  and  the  same  crew,  a 
little  more  pull  and  steam,  but  that  is  not  very  great '. 

Mr.  Mann.  My  difficulty  is  to  understand  how  if  we  are  sitting 
down  together  and  trying  to  fix  a  fair  rate  on  100  pounds,  we  will 
say,  of  angle  irons,  structui'al  iron  and  steel,  that  are  going  to  move 
from  New  York  to  Galveston,  we  are  going  to  fix  the  rate  on  the 
10.000-ton  steamer  and  the  rate  on  the  1.000-ton  steamer,  and  yet  fix 
them  at  the  same  rate  per  100  pounds,  because  certainly  we  can  not 
contemplate  making  one  rate  for  one  vessel  and  another  rate  for 
another  vessel,  and  yet  give  to  each  one  of  the  steamers  a  fair  return. 

^fr.  Saunders.  Why  can  not  that  be  met  in  this  way,  by  classifica- 
tion, steamers  of  a  certain  type  and  size,  say,  charge  a  maximum  rate, 
and  steamers  of  another  classification  and  size,  another  maximum 
rate?    There  is  no  inequality  in  that. 

Mr.  Mann.  I  think  you  will  find  that  the  dock  charges  and  general 
expenses  of  operation  will  vary  very  materially  in  the  two  kinds  of 
ships,  and  still  you  might  say  that  that  will  be  taken  into  considera- 
tion. 

Mr.  Saunders.  AVould  not  that  be  an  element  to  lie  taken  into  con- 
sideration ? 

The  Chairman.  The  regular  lines  on  the  Atlantic  and  Pacific 
coasts  have  their  rates  now.  They  all  filed  their  rates  with  this  com- 
mittee in  its  investigation  of  the  so-called  Shipping  Trust.  You 
are  assuming  a  difficulty  which  they  are  solving  for  themselves. 

Mr.  ]Mann.  Each  line  has  established  a  system  of  rates.  They  were 
effective  February  1,  1915.  Prior  to  that  time  they  had  a  very  dif- 
ferent system  of  rates  indeed.  Let  us  take,  for  example,  the  rates  for 
iron  and  steel. 

(Thereupon  an  informal  recess  was  taken.) 

Mr.  Greene.  I  wanted  to  ask  Mr.  Mann  a  (juestion  along  the  lines 
we  Avere  talking  about  when  we  took  a  recess.  I  would  like  to  ask  if 
there  is  not  one  factor  which  disturbs  this  question  of  regulating 
rates  in  the  foreign  trade,  and  that  is  the  factor  of  the  tramp  ship. 
We  have  had  testimony  before  the  committee  that  two-thirds  of  the 
vessels  in  the  foreign  trade  are  tramp  ships.  Xow,  if  6G  per  cent  of 
the  vessels  in  the  foreign  trade  p.re  tram]>  ships  which  are  not  reg- 
ulated and  which  it  is  not  proposed  to  regulate  bv  this  bill,  and 
which  can  not  be  regulated  because  they  are  individual  shii)s,  why, 
is  not  that  one  strong  factor  why  we  should  not  have  regulation  of 


16G  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

rates  in  the  foreign  trade?  And  then,  furthermore,  of  course,  we 
are  subject  to  foreign  competition  with  foreign  vessels  which  are 
subsidized  and  all  other  conditions  that  arise  in  the  foreign  trade 
which  we  can  not  control  or  which  we  might  control  only  to  a  slight 
extent,  but  Avhich  in  general  we  can  not  control,  are  not  those  im- 
portant factors  in  the  situation? 

jNIr.  Manx.  I  think,  Mr.  Greene,  you  are  entirely  right  in  calling 
attention  to  the  not  onh'  impracticability  but  the  absolute  impossi- 
bility of  controlling  foreign  freighters.  Two-thirds  of  the  foreign 
trade  probably  does  move  in  what  ma}^  be  called  tramp  vessels,  but 
what  do  you  mean  by  tramp  vessels?  What  do  we  mean  b}'  tramp 
vessels?  We  mean  vessels,  if  3'ou  please,  that  are  privately  owned, 
but  all  vessels  are  privately  owned  in  a  sense.  AVe  mean  vessels  that 
belong,  we  will  say,  to  no  regular  line  of  steamers.  Then,  we  will 
take  a  regular  line  of  steamers  and  ships  operating  way  back  prior 
to  1870,  the  American-Hawaiian  Steamship  Co.,  a  very  fine  line  in- 
deed, and  they  used  to  operate  clipper  ships  around  the  Horn,  and 
they  brought  the  commerce  from  New  York  and  the  Atlantic  coast 
to  the  Pacific  coast,  and  it  w^as  the  great  competition  of  those  steam- 
ers, as  Avell  as  other  independent,  if  you  please,  tramp  ships  which 
the  railroads  were  compelled  to  meet  in  18G9  when  the  golden  spike 
was  driven  which  united  the  Central  Pacific  Railroad  and  the  Union 
Pacific  Railroad  at  Promontory,  Utah.  It  was  for  that  reason  the 
railroads  had  to  consider  whether  or  not  the}^  would  keep  the  traffic 
to  the  rails  or  let  it  go  to  the  sea. 

The  American-Hawaiian  Steamship  Co..  commencing  with  clipper 
ships,  finally  come  to  steamer  lines.  Finally  the  Tehuantepec  Rail- 
road was  built  across  the  southern  part  of  Mexico  from  Salina  Cruz 
to  Puerto,  Mexico;  and  prior  to  the  opening  of  the  Panama  Canal 
a  very  excellent  service,  indeed,  was  given  between  the  coasts  by  this 
line,  with  an  unloading  on  one  side  and  a  loading  on  the  other  side  on 
both  east  and  west  bound  freight  with  a  movement  across  the  Isthmus 
of  Tehuante]:>ec.  Then  the  Panama  Canal  was  opened  and  the  Ameri- 
can-HaAvaiian  Steamship  Co.,  with  its  26  ships,  proceeded  to  operate 
through  the  Panama  Canal,  in  the  same  class  of  trade,  you  might  say, 
between  the  Atlantic  and  Pacific  coasts  and  also  to  the  Hawaiian 
Islands  in  the  sugar  trade.  There  was  a  regular  line  of  steamers.  It 
was  a  historic  line.  It  operated  in  coastwise  business  and  it  operated 
very  hopefully  for  the  future  under  a  provision  of  the  statutes  which 
confines  coastwise  traffic  of  the  United  States  to  American-built 
vessels.  It  was  as  regular  a  line  as  could  be  imagined,  and  what  has 
happened  to  it?  It  is  to  all  intents  and  purposes  a  tramp  line.  It 
is  not  a  line  at  all.  The  various  high  charter  offerings  which  are 
made  for  the  transportation  of  freights  over  the  oceans,  particularly 
between  the  Atlantic  coast  and  Europe,  have  attracted  ])ractically 
all  of  these  steamers  into  that  trade,  and  those  steamers,  I  am  told, 
in  many  cases  are  being  chartered  at  the  rate  of  $100,000  net  per 
month.    What  do  you  mean  by  a  tramp  line  ? 

You  can  not  confine  a  shij)  to  any  particular  operation,  but  you 
can  confine  and  you  must  confine  and  you  must  consider  as  confined 
a  railroad  company  in  operating  a  railroad.  They  can  not  run  their 
cars  except  over  the  rails,  and  they  are  held  and  firmly  held  to  the 
rails,  and  that  is  another  instance  of  the  monopoly  of  railroads  and 
the  impossibility  of  a  continuous  monopoly  on  the  sea. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  167 

Now  we  have  all  heard  about  the  Baltic  pool.  AVe  all  know  the 
problems  that  ha\e  been  before  Congress  here.  Some  of  us  are 
familiar  with  Franklin  K.  Lane's  decision  in  the  Baltic  Pool  case, 
which  resulted  in  requiring  the  railroads  to  publish  the  inland  pro- 
portion of  the  haul  destined  from  a  point  in  the  United  States  to  a 
foreign  country.  We  are  all  familiar  with  those  conditions  and  we 
find  that  as  a  matter  of  fact  we  are  limited  when  it  comes  to  an 
attempt  to  control  the  commerce  of  the  world. 

I  remember  that  Mr.  William  J.  Bryan — I  have  always  been  a 
Democrat  and  I  have  found  myself  supporting  William  J.  Bryan 
up  to  ver}'  recently — said  when  he  advocated  the  principle  of  IG 
to  1  without  the  consent  of  any  foreign  nation,  that  if  the  United 
States  adopted  this  principle  of  10  to  1  all  the  nations  of  the  world 
would  have  to  do  the  same  thing.  Now,  that  was  a  prediction.  We 
never  adopted  16  to  1,  and  therefore  we  do  not  know  whether  it  is 
true  or  not.    Some  of  us  believe  that  it  probably  was  not  true. 

If  you  attempt  to  regulate  the  commerce  of  the  world,  and  that  is 
what  it  seems  to  me  you  are  trying  to  do  under  this  bill  as  far  as  the 
United  States  is  concerned,  by  fixing  rates  of  freights  and  fares,  in 
both  import  and  export  business,  for  that  is  the  language  of  your 
bill,  gentlemen,  it  seems  to  me  you  are  saying  to  the  shipowners  of 
the  world  that  if  you  are  going  to  deal  with  the  United  States,  either 
by  taking  our  freight  to  a  foreigTi  country  or  by  bringing  freight 
from  a  foreign  country  to  our  shores,  you  must  comply  with  all  of 
our  rules  and  regulations  as  to  how  much  income  you  are  going  to 
get  per  ton.  You  are  then  going  to  meet  one  of  two  situations,  and 
perhaps  both. 

One  situation  will  be  that  inasmuch  as  all  steamers  and  vessels 
may  sail  the  waters  of  the  globe  wherever  they  please  and  may  en- 
gage in  commerce  wherever  they  find  it  to  their  advantage  so  to  do ; 
that  ships  and  vessels  of  foreign  ownership  will  abandon  your  ports ; 
or  secondly  they  will  land  their  goods,  let  us  say,  in  Canada  and 
bring  them  across  to  the  United  States  when  they  are  coming  from 
a  foreign  country,  or  vice  versa,  ship  from  the  Canadian  port  to  the 
foreign  country,  and  you  are  then  practically  erecting  a  Chinese 
wall  around  all  of  the  great  seaports  of  the  United  States  against  all 
foreign  trade.  Now,  with  respect  to  your  interstate  commerce  or 
your  coastwise  business,  if  you  are  going  to  have  the  principles  of 
political  economy  and  freedom  of  government  operate  with  respect 
to  this  very  valuable  part  of  our  transportation  and  commercial 
system ;  if  you  are  going  to  have  freedom  in  this  line,  you  are  going 
to  leave  your  domestic  vessels  untrammeled  by  restrictions  with 
respect  to  what  they  are  going  to  charge,  because  when  you  say  to  a 
shipping  man,  a  man  is  about  to  invest  his  money  in  ships :  "  You 
can  not  engage  in  bus;iness  except  under  very  severe  penalties,  and 
unless  you  agree  that  you  will  always  charge  the  same  amount  to  one 
man  that  you  do  to  another,  and  that  you  will  not  charge  any  more 
than  your  published  rates,"  because  in  this  bill  we  are  discussing  here 
you  have  brought  into  the  bill  practically  sections  2,  3,  and  4  of 
the  interstate  commerce  act  which  prevents  the  obtaining  of  a  differ- 
ent rate  through  any  device,  method,  or  plan  whatsoever;  if  you 
are  going  to  say  to  men  who  have  money  to  invest  in  ships  and  to 
engage  in  traffic  on  the  seas,  "  You  must  come  under  this  principle, 
and  you  can  not  engage  in  business  except  by  permission  of  the  ship- 


168  KEGULATORY    FEATUEES    OF    SHimXG    BILL. 

ping  commission,  and  exevy  movement  you  make  must  be  under  their 
control  just  as  it  is  on  a  railroad,"  what  is  the  man  with  money  to 
invest  going  to  say  about  going  into  the  business?  He  is  going  to 
say,  "  I  do  not  care  to  go  into  that  business.  I  will  abandon  it  to  the 
big  lines,"  and  instead  of  bringing  about  freedom  of  competition, 
you  will  bring  about  monopolization,  which  is  the  thing  that  you 
had  intended  not  to  do. 

If  you  are  going  to  control  the  rates  of  the  shipping  between 
coasts ;  if  you  are  going  to  say  to  the  big  companies  like  the  American- 
Hawaiian  Steamship  Co.,  the  Luckenbach  Steamship  Co.,  W.  R. 
Grace  &  Co.,  the  people  who  have  been  operating  through  the  canal, 
'"  you  must  file  your  tariifs  and  you  can  not  change  them  except  on 
10  days'  notice,  and  you  can  not  make  any  different  arrangement  be- 
tween one  man  and  another,"  and  this  is  going  to  apph^  to  all  vessels, 
for  there  is  no  distinction  that  I  can  find  in  the  act,  Mr.  Greene,  be- 
tween a  regular  line  and  a  tramp  line  or  between  a  privately-owned 
steamer  and  any  other,  because  it  says  that  any  person,  firm,  corpora- 
tion, or  other  person  is  subject  to  the  provisions  of  this  act  who  is 
engaged  in  said  commerce,  interstate  or  foreign,  under  those  circum- 
stances a  man  who  is  contemplating  an  investment  in  a  ship  is  going 
to  say,  "  I  do  not  want  to  go  into  the  business.  I  can  not  compete 
with  the  big  and  powerful  lines  like  the  American-Hawaiian  Steam- 
ship Co.,  the  Luckenbach  Steamship  Co.,  now  building  six  ships, 
vrhicli  will  be  delivered  in  1917,  of  over  10,000  tons  burden,  and 
W.  R.  Grace  &  Co.,  which  has  recently  acquired  the  Pacific  Mail 
Steaship  Co.  I  am  not  going  to  enter  into  any  kind  of  opposition 
to  them."  Why  ?  "  Because  I  can  not  expect  to  compete  with  those 
men  unless  I  can  compete  on  the  question  of  rates;  unless  I  can  go 
into  the  market  and  underbid,"  and  that  is  competition.  What  is 
^.•rong  about  competition,  provided  .you  are  not  exercising  a 
monopoly? 

Mr.  Hardy.  Suppose  you  reached  the  conclusion  which  I  think  was 
unanimously  reached  in  this  committee  after  two  years  of  investiga- 
tion of  shipping  combines,  that  so  far  as  competition  was  concerned, 
the  day  of  competition  on  the  ocean  was  gone ;  that  combination  had 
taken  its  place,  and  that  all  laws  against  coml3inati()n  Avere  futile  in 
that  respect,  and  that  the  time  has  come  now  to  recognize  combina- 
tion and  regulate  it.  Now,  3'ou  will  admit,  will  you  n(  t,  that  unre- 
strained combination  or  monopoly  is  unendurable  to  the  public? 
Xow,  if  3-ou  have  no  restraints  of  law,  but  leave  the  l)ig  fish  and  the 
little  fish  all  in  the  sea  t(  gether  to  work  our  their  final  destination 
by  themselves,  it  appeared  to  us  and  it  was  the  unanimous  conclusion 
of  those  who  sat  and  li.stened  to  the  testimony,  that  the  big  fish  would 
eat  up  the  little  ones,  and  ultimately  result  either  in  a  monopoly  or 
t;lse  in  such  a  combination  as  would  be  the  same  thing  as  a  monopoly. 
AVe  concluded  that  under  those  conditions,  finding  it  impossible  to 
prevent  combination  or  monopoly,  it  was  necessary  to  recognize  it, 
and  the  re]ircsentatives  of  the  big  shipping  interests  came  before  us, 
and  I  think  nearly  every  one  of  them  said,  "We  believe  you  can  not 
prevent  combination.  We  think  you  see  that  from  the  testimony, 
and  we  believe  that  if  combination  exists  some  regulation  must  be 
had." 

Consequently,  as  the  result  of  the  conclusions  of  that  connnittee, 
Judge  Alexander  introduced  bill  No.  450,  which  is  a  counter))art  and 


RROTTr.ATORV    FKATURES    OF    SHIPP1N(;    1511. f..  160 

practically  the  same  as  the  bill  we  are  having  the  hearing  on  now. 
As  I  understood  it  then,  the  shipping  men  said  that  yon  needed  regu- 
lation and  that  combination  should  be  recognized.  Now,  when  Ave 
attempt  to  do  that,  they  come  in  with  a  different  story,  and  to-day  I 
understand  you  to  say  you  want  no  regulation  whatever. 

Mr.  Mann.  Xo  regulation  of  freight  rates.  We  must  have  regula- 
tion just  as  we  have  regulation  in  insurance  companies.' 

Mr.  Hardy.  Then,  when  competition  ceases  to  be  competition, 
which  is  the  point  you  are  dwelling  on  now,  and  becomes  combina- 
tion, you  w^ant  no  power  under  the  sun  to  say,  "  Thus  far  you  shall  go 
and  no  further.  You  can  take  my  coat,  my  hat,  my  top  shirt,  and 
we  do  not  even  want  to  stop  at  the  bottom  shirt  or  the  undershirt; 
we  want  this  combination  to  have  the  power  to  take  everything  off." 
Do  you  Avant  absolutely  no  power  at  all  vested  in  the  GoA'ernment  ? 

Mr.  Manx.  Mr.  Hardy,  with  your  permission  I  will  deny  the  fact 
that  the  coastwise  shipping  is  the  subject  of  monopoly  or  combina- 
tion, and  in  that  respect  I  should  fear  the  Greeks  even  when  bearing 
gifts.  AVhen  a  combination  comes  before  the  committee  and  says, 
"  Yes;  we  would  like  to  be  regulated  or  w'e  will  justify  regulation,  or 
we  think,  perhaps,  you  will  have  to- regulate  us 

Mr.  Hardy  (interposing).  You,  then,  place  no  confidence  in  a  con- 
fession against  interest? 

Mr.  Mann.  Not  under  those  circumstances. 

The  CiiAiKiMAx.  Let  us  take  a  case  right  on  your  own  coast.  How 
many  lines  are  there  from  Seattle  to  San  Francisco? 

Mr.  Mann.  Three  or  four  regular  lines,  I  should  say,  are  there  not? 

Mr.  Wettrick.  At  least  that  many. 

The  Chairman.  How  many  are  in  competition? 

Mr.  Mann.  You  will,  of  course,  find  them  under  a  condition  of 
wise  competition,  not  cut-throat  competition,  not  monopolistic  com- 
petition, but  you  will  find  a  fairly  well  settled  run  of  rates. 

The  Chairman.  Their  rates  are  identical,  are  they  not? 

Mr.  Mann.  No;  I  can  not  say  that.  They  are  not  identical  in 
passenger  business ;  I  know  that  is  true. 

The  Chairman.  Are  they  the  same  in  the  freight  business? 

Mr.  Mann.  And  I  am  not  prepared  to  say  they  are  the  same  in 
freight  business,  because  they  ai"e  not  regulated,  and  they  may  change 
those  rates  from  time  to  time  even  if  they  publish  the  same  rates,  the 
publicati(.n  not  being  under  statute. 

The  CuAiRiiAN.  Are  those  lines  railroad  owned  or  conti'olled? 

Mr.  Mann.  No,  sir;  the  Pacific  (^oast  Steamship  Co.  is  not  rail- 
road owned  or  controlled,  nor  the  San  Fi-ancisco  c*c  Po)tland  Steam- 
ship Co.,  nor  the  Alaska  Pacific  Steamship  Co..  which  is  a  Guggen- 
heim company.  I  do  not  know  of  any  line  owned  and  controlled 
by  the  railroads,  except  the  I^nion  Pacific  has  one  line,  has  it  not? 

Mr.  Wettrick.  Yes,  sir:  from  Portland  to  San  Francisco;  but  the 
Interstate  Commerce  Commission,  you  will  remembeT".  permitted 
them  to  continue  that  line. 

Mr.  Mann.  Yes;  they  have  been  permitted  to  continue  that  line. 

The  CiiAiRiviAN.  How  many  lines  are  there  from  Seattle  to  Los 
Angeles? 

Mr.  Mann.  Well,  those  same  lines,  or  many  of  them,  nm  down  as 
far  as  Los  Angeles,  sto])i)ing  at  the  intermediate  ports  and  taking  on 
goods  for  carriage  at  those  ports. 


170  REGULATORY    FEATURES    OF    SHIiTlXG    BILL. 

The  Chaiiolvn.  Does  the  line  f re m  Seattle  t<  uch  at  San  Francisco 
on  its  way  to  Los  Angeles? 

Mr.  ]Manx.  Yes;  the  Pacific  Coast  Steamship  Co.  operates  between 
San  Francisco  and  Los  Angeles  as  well  as  between  San  Francisco 
and  Portland  and  Portland  and  Seattle,  and  the  same  is  substan- 
tially true  of  the  San  Francisco  &  Portland  Steamship  Co. 

Mr.  Hardy.  You  Avill  admit  we  have  no  competition  now  of  rail- 
r(;ads? 

Mr.  Manx.  Yes,  sir;  we  have  competition — what  is  known  as  com- 
i:)etition  of  service. 

Mr.  Hakdy.  Exactl\';  five  ye.irs  ago  (  ur  commission  for  the  State 
said  that  all  competition  in  railroad  traffic  was  gone,  except  one  road 
would  have  a  little  better  service  or  better  accommodation  or  a  better 
looking  porter  or  something  of  that  sort  so  far  as  passengers  were 
concerned;  and  in  railroad  freight,  one  road  would  be  a  little  bit 
quicker  or  a  little  bit  more  accommodating  through  its  agents,  but 
they  said  it  was  competition  in  trying  to  give  a  better  degree  of 
service. 

Mr.  Manx.  I  have  answered  too  hastih'  in  saj'ing  there  is  no  com- 
petition among  railroads.  It  is  true  that  the  railroads  are  obliged 
to  make  substantially  the  same  rates  for  the  mo^.ement  of  freight  be- 
tween the  same  points,  but  the}'  do  that  very  frequently,  and  espe- 
cially in  the  case  of  a  long  line  on  the  ground  of  the  competition  of 
the  shorter  line,  and  the  Interstate  Commerce  Conunission  has  held 
that  the  competition  of  a  shorter  line  between  two  points  is  an  excep- 
tional case  justifying  the  longer  line  in  meeting  the  rate  of  the 
shorter  line,  and  in  those  cases  charging  a  higher  rate  to  the  inter- 
mediate points,  so  that  tliere  is  competition  existing  in  rates. 

Mr.  Hardy.  And  therefore  the  long  line  has  no  competition  where 
it  does  not  meet  a  shorter  line,  and  really  uses  its  intermediate  points 
as  a  means  to  club  the  short  line  to  death,  and  the  longer  the  line  is 
the  stronger  it  is  in  its  competition. 

Mr.  Manx.  No;  I  should  put  it  the  other  way,  ]Mr.  Hardy,  and 
there  are  not  very  many  permanent  deaths  among  railroads,  either. 

Mr.  Hardy.  I  do  not  know  whether  you  call  them  deaths,  but  they 
go  through  a  period  of  translation  and  they  squeeze  the  little  fellows 
out  and  there  is  a  receiver  appointed  and  bonds  are  foreclosed,  and 
the  stockholders  who  have  had  the  property  go  gliuimering,  and  there 
has  been  a  period  of  rich  rioting  for  the  strong  manipulators,  but 
also  a  period  in  which  the  people  finally  concluded  that  a  coml)ina- 
tion  of  railroads  was  inevitable  and  that  they  had  to  regulate  the 
rates.  Xow,  if  the  same  condition  exists  on  sea,  what  other  remedy 
is  there  ?  There  is  only  one  other  remedy,  I  will  tell  you  now,  either 
you  have  got  to  regulate  these  rates  or  the  Governuient  ultiuiately 
has  got  to  come  in  and  become  the  sole  operator  of  such  conq)anies. 
A  monopoly  is  an  unendurable  thing  to  free  people.  You  give  any 
class  of  people  an  uncontrolled  monopoly  on  a  necessity  of  life,  and 
it  is  the  power  of  taxation. 

Mr.  Manx.  Yes;  an  uncontrolled  monopoly. 

Mr.  Hardy.  An  unlimited  power  and  only  subject  to  their  modera- 
tion. Like  Lord  Clive  said  when  he  was  in  India,  when  he  saw  his 
opportunities  he  was  astonished  at  his  own  moderation.  I  do  not 
blame  these  people  for  charging  all  they  can  get.     The  carriers  in 


EEGULATORY    FEATURES    OF    SHIPPIXG    BILL.  171 

this  country,  rail  or  otherwise,  were  never  to  blame  for  taking  the 
last  dollar  they  could.     It  is  the  fault  of  the  people  who  permitted  it. 

Mr.  Manx.  And  yet.  jNIr.  Hardy,  it  seems  to  me  a  strange  thing  if 
an,v  of  these  larger  coastwise  companies  have  come  to  this  committee 
and  admitted  that  there  was  a  combination  Avhich  fixes  rates  when 
we  will 

Mr.  Hardy  (interposing).  The}^  do  not  admit  it;  they  swear  it. 

Mr.  ]Maxx  (continuing).  When  we  will  find  those  same  companies 
next  Monday  represented  by  attorneys  before  the  Interstate  Com- 
merce Commission  claiming  that  the  railroads  are  driving  them  out 
of  business.  If  any  of  you  gentlemen  come  up  before  the  Interstate 
Commerce  Commission  next  Monday,  you  will  find  that  position 
being  maintained  by  those  people — that  the  railroads  have  gone  so 
low  that  they  are  driving  the  ships  out  of  business. 

]Mr.  Hardy.  Is  it  astonishing  to  you  to  find  various  and  sundry 
conflicting  contentions  of  representatives  of  some  interests  under  dif- 
ferent circumstances? 

Mr.  Maxx.  Xo,  sir:  I  see  it  almost  invariably,  and  that  is  the 
reason  I  doubt  any  contention  coming  from  the  Greeks. 

Mr.  Greexe.  I  would  like  to  ask  you  a  question.  In  view  of  the 
fact  that  the  question  has  been  brought  up  here,  that  we  have  made 
an  investigation  of  these  various  lines  and  found  that  there  were 
conferences,  agreements,  and  all  that  kind  of  thing,  and  while  no 
objection  was  made  to  the  report  that  was  made,  because  it  con- 
tained simply  a  statement  of  the  facts,  this  bill  No.  450  and  bill  No. 
14337  are  bills  drawn,  as  we  are  informed,  as  the  result  of  that  in- 
vestigation, and  being  a  result  of  that  investigation,  this  bill  that  we 
are  now  considering — No.  14337 — proceeds  to  put  on  what  I  call  strin- 
gent regulations  in  regard  to  shippers,  and  while  we  say  we  are  hav- 
ing a  bill  prepared  now  to  build  up  the  American  merchant  marine, 
at  the  same  time  it  is  my  contention  that  this  regulation  provided  for 
in  this  bill  ties  the  hands  of  the  xVmerican  shipper,  and  if  in  any  way 
it  has  any  releasing  features,  it  is  because  it  can  not  tie  the  hands 
of  the  foreigner  in  the  same  manner  that  it  ties  the  hands  of  the 
American  shipper. 

Mr.  Maxx.  With  that  I  entirely  agree. 

Mr.  Greexe.  It  is  my  contention  that  these  regulations  are  unjust 
and  improper;  that  they  ought  not  to  be  adopted;  and  they  ought  not 
to  be  put  in  this  bill  if  this  bill  is  intended  to  build  up  the  American 
merchant  marine. 

Mr.  Maxx.  Replying  to  your  question;  out  there  on  the  Pacific 
coast  w^e  have  very  powerful  lines  of  steamers  operating  between  the 
Orient  and  the  Pacific  coast.  They  are  Japanese  lines,  and  my  un- 
derstanding is  that  they  operate  under  subsidies  which  guarantee 
them  against  any  possible  loss,  even  if  they  have  to  run  empty.  The 
effect  of  the  seamen's  bill  was  to  favor  those  lines,  because  they  are 
officered  by  Japanese  officers,  and,  of  course,  Japanese  crews  w411 
work  for  very  low  wages.  Now,  if  j^ou  attempt,  or  if  Congress  at- 
tempts, to  fix  the  rates  of  freight  upon  Japanese  lines,  I  would  like 
to  knoAv  how  we  are  going  to  prevent  the  Japanese  companies  from 
giving  rebates  to  the  shippers  from  Japan  to  America  or  rebates  to 
the  consignees  in  Japan.  I  can  not  see  any  possible  way.  I  do  not 
see  how  you  can  prevent  those  rebates  from  any  freight  rate  that 
you  may  see  fit  to  fix,  or  how  you  are  ever  going  to  be  able  to  prove 


172  REGULATORY    FEATURES    OF    SHIPPING    BILl. 

it,  and  if  it  applies  to  the  Japanese  lines,  whj'  should  it  not  apply 
to  the  German  lines,  English  lines,  French  lines,  or  any  other  lines 
of  steamers 

Mr.  Hardy  (interposing).  Did  yon  ever  talk  to  Mr.  Humphrey, 
your  Representative  from  the  Pacific  coast,  upon  the  question  or 
preventing  rebates  and  unfair  combinations  and  practices  by  foreign 
shipping  lines  coming  into  our  ports?  He  introduced  a  bill  along 
that  line,  and  talked  for  it  here  as  long  as  he  was  on  this  committee. 
J  confess  that  he  was  not  as  anxious  about  the  regulation  of  domestic 
lines,  but  he  wanted  to  regulate  the  foreign  lines.  We  made  an  in- 
Testigation  of  that,  and  undertook  to  determine  what  our  powers 
were.  Among  other  things,  he  had  a  provision  that  upon  a  shipping 
company  being  found  guilty  of  being  engaged  in  such  conduct  as  I 
?iave  described,  it  should  be  denied  the  right  of  entry  into  any  of  our 
ports. 

The  Chairman.  Yes;  and  we  passed  a  bill  of  that  kind  through 
the  House  b}^  unanimous  consent. 

Mr.  Mann.  Of  course  it  may  be  necessary  for  us,  as  I  sa}'',  in  this 
experimental  age,  to  endeavor  to  control  that  situation  so  far  as 
foreign  ships  are  concerned,  but  I  do  not  think  it  will  take  long  to 
convince  Congress  that  it  is  impracticable  and  impossible — — 

Mv.  Hardy  (interposing).  My  impression  was  when  the  shoe  was 
on  one  foot,  which  was  the  foreign  foot,  the  domestic  ship  owners 
were  rather  inclined  to  rejoice  in  it,  but  now  that  it  is  on  both  feet 
and  includes  both  the  domestic  and  the  foreign  ships  you  are  kicking 
like  bay  steers  over  it.  Now,  you  do  not  doubt  the  power  of  this 
Government  to  prevent  rebates  being  given  by  ships  at  any  of  our 
ports,  do  you? 

Mr.  Mann.  I  do  not  doubt  the  power  of  this  Government  to  pre- 
vent clearances  or  to  take  away  licenses  or  to  do  any  of  those  things, 
but  I  do  doubt  the  power  of  the  Government  to  compel  those  foreign 
ships  to  come  into  our  ports. 

Mr.  Hardy.  There  is  no  question  about  that,  and  nobody  will  try 
to  compel  foreign  ships  to  come  in. 

The  Chairman.  Would  you  object  to  this  provision  going  into 

this  bill : 

That  wlienever,  after  full  hearing  uijou  a  sworn  complaint,  the  board  shall  be 
of  opinion  that  any  rates  or  charf,'ei>  demanded,  cliarged,  or  collected  by  auy 
common  carrier  by  water  in  foreif?n  commerce  are  unjustly  discriminatory 
between  shippers  or  ports,  or  unjustly  prejudicial  to  exporters  of  the  United 
States  as  compared  with  tlieir  foreign  competitors,  the  board  is  iiereby  empow- 
ered to  alter  the  rates  or  charges  demanded  to  the  extent  necessary  to  correct 
such  unjust  discrimination  or  prejudice  and  to  make  an  order  that  such 
carriers  shall  cease  and  desist  from  such  inijust  discrimination  or  prejudice. 
The  board  is  hereby  also  empowered,  upon  sworn  comi^laint  after  full  hearing, 
to  determine,  prescribe,  and  order  enforced  just  and  reasonable  regulations  and 
practices  relating  to  ov  connected  with  the  receiving,  handling,  storing,  and 
delivering  of  property  by  any  such  carrier? 

Mr.  Mann.  Yes,  sir;  I  object  to  any  regulation  of  that  kind  or 
character  affecting  freight  rates  upon  any  vessels. 

The  Chairman.  That  provision  was  approved  by  the  Chamber  X)f 
Commerce  of  New  York  through  Mr.  Kirlin,  their  attorney;  Mr. 
Franklin,  of  the  International  Morcantilo  Marino:  nnd  Mr.  Bush, 
superintendent  of  terminals  of  Ncav  York,  and  otlicr  gentlemen  who 
were  here  gave  it  their  approval. 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  173 

Mr.  Mann.  It  comes  for^vurd  worthily  and  well  qualified,  but  still 
I  object  to  it  and  could  not  possibly  consent  to  it.  My  objection  to  it 
is  based  upon  a  principle,  and  that  is  that  any  regulation  of  that  kind 
or  character  should  be  confined  to  monopoly,  and  I  deny  that  the 
sea  is  a  monopoly  or  that  it  can  be  monopolized. 

The  Chairman.  If  you  will  read  the  report  of  our  investigation, 
you  will  have  your  mind  disabused  on  that  subject. 

Mr.  Mann.  Let  me  develop  for  a  moment  the  conditions  govern- 
ing the  operation  of  ships  at  sea.  It  is  necessary,  in  order  that  you 
shall  have  independence  and  freedom  of  competition  on  the  ocean 
that  the  shipowner,  or  the  tramp  steamer,  if  you  like,  or  any  com- 
peting steamer,  if  you  like,  shall  be  able  to  come  into  port  and  say 
to  the  men  who  are  ofi'ering  goods  for  shipment,  "  I  will  take  these 
goods  in  order  to  fill  my  ship  at  the  following  rate,  if  you  will  give 
the  shipment  to  me  " — which  rate  may  be  less  than  the  amount  he 
has  charged  to  another  shipper  on  the  same  commodity  moving  in 
the  same  \  essel.  The  reasons  for  that  are  legion.  For  instance,  sup- 
pose a  ship  about  to  leave  port  has  had  a  thousand  tons  of  space  en- 
gaged for  a  month,  and  then  it  is  suddenly  given  up.  We  will  sup- 
pose that  the  man  who  engaged  the  space  goes  into  insolvency  or 
something  of  that  kind,  and  there  is  a  thousand  tons  of  space  upon 
that  vessel  unfilled.  Now,  the  vessel  must  sail  to-morrow ;  she  is 
obliged  to  sail  to-morrow  or  submit  herself  to  damages  for  delay  on 
the  complaint  of  other  shippers.  There  is  this  thousand  tons  of 
space,  and  what  is  the  owner  of  that  ship  or  the  captain  of  the  ship 
going  to  do?  He  will  endeavor  to  fill  that  space,  if  he  can,  and  in 
order  to  fill  that  space  within  the  short  time  he  has  in  which  to  fill 
it,  he  will  offer  inducements  that  will  bring  the  freight.  He  will 
offer  inducements  that  will  induce  somebody  who  did  not  intend 
to  ship  to  ship  his  goods.  Now,  in  order  to  do  that  he  must  offer  a 
rate  that  is  attractive,  and  it  may  be  low^er  than  somebody  else  has 
on  the  same  commodities  in  the  same  ship. 

Mr.  Hardv.  If  I  understand  you,  you  are  in  favor  of  giving  the 
shipowner  the  right,  without  giving  any  reason  for  it,  to  discrimi- 
nate between  his  customers  and  patrons  whenever  he  sees  proper? 

Mr.  Mann.  Yes,  sir;  and  that  was  the  rule  at  common  law. 

Mr.  Hardy.  So  you  think  that  a  ship  sailing  from  San  Francisco 
should  have  the  right  to  charge  you,  for  instance,  100  per  cent  more 
than  it  charges  your  competitor,  as  a  steady-going  and  regular  propo- 
sition, because  they  simply  desire  to  favor  your  competitor  and  to 
crush  you  out  of  business? 

Mr.  Mann.  Well,  theoretically,  yes,  sir;  but  practically,  no;  be- 
cause that  is  never  done. 

Mr.  Hardy.  I  am  not  talking  about  whether  it  has  ever  been  done. 
Would  you  give  them  the  power  to  crush  one  man  by  charging  him 
two  prices  over  what  they  charge  his  competitor  ? 

Mr.  Mann.  That  is  what  I  said,  but  I  said  that  that  condition  has 
never  occurred,  that  it  never  can  occur,  and  never  will  occur,  for  the 
reason  that  the  sea  is  open,  and  the  moment  that  thing  happens 
somebody  is  going  to  put  a  ship  on  and  stop  it. 

Mr.  Hardy,  Do  you  think  that  somebody  could  put  a  ship  on  now 
to  beat  a  combination  of  this  sort,  when  the  evidence  before  us  was 
that  they  could  drive  out  any  kind  of  competition 


174  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

ISlv.  Ma^n   (interposing).  Your  are  speaking  of  a  gigantic  pool. 

Mr,  Hardy.  I  am  speaking  of  the  pool  operating  between  New 
York  and  Galveston. 

Mr.  Maxn.  Not  now. 

Mr.  Hardy.  Yes.  Of  course,  everything  is  torn  to  pieces,  and  a 
ship  can  get  all  the  transj^ortation  it  wants  at  from  four  to  six  prices. 
I  am  talking  about  the  conditions  that  will  confront  us  if  this  com- 
bination should  be  permitted  to  go  on  unrestrained,  and  I  just  wanted 
to  see  whether  you  were  Avilling  that  a  shipping  combination  shall  be 
permitted  to  operate  unrestrained  and  charge  you  steadily  and  con- 
tinuousl,y  twice  as  much  as  they  charge  your  competitor. 

Mr.  Mann.  Of  course,  if  we  admit  your  premises,  3'our  conclusion 
is  unassailable,  but  your  question  is  based  upon  the  premise  that  there 
is  a  combination  existing  on  the  sea,  both  between  coast  ports,  or  in 
coastwise  traffic,  as  well  as  in  foreign  traffic,  absolutely  contrary  and 
opposed  to  justice,  and  that  there  is  nothing  to  fight  it  or  overcome 
it  except  some  such  act  as  the  one  proposed  here.  If  that  premise 
were  true,  and  I  were  convinced  of  it.  I  would  agree  with  you. 

Mr.  Hardy.  You  are  not  convinced  that  there  is  a  combination  ? 

Mr.  Mann.  I  am  not  convinced  that  there  is  any  combination  in 
coastwise  traffic. 

Mr.  Hardy.  Did  vou  ever  read  the  evidence  that  was  taken  before 
this  committee,  consisting  of  four  volumes? 

Mr.  Mann.  No,  sir. 

Mr.  Hardy.  I  wish  you  would  read  that  and  then  tell  me  whether 
you  believe  there  was  any  combination  prior  to  this  war. 

Mr.  Mann.  I  know  this,  that  large  steamship  companies  that  are 
operating  through  the  canal  in  coastwise  commerce  were  favorable 
to  allowing  the  Pacific  Mail  steamers  which  were  owned  by  the 
Southern  Pacific  Co.  to  continue  in  operation  through  the  canal,  and 
I  think  I  can  divine  the  reason  why  they  wanted  the  railroad-owned 
vessels  to  continue  to  operate  through  the  canal.  I  think  the  reason 
was  that  they  felt  that  if  they  had  three  hundred  or  four  hundred 
million  dollars  behind  a  steamship  company  that  was  operating 
through  the  canal,  that  that  company  would  ultimately  help  to  hold 
up  the  rates  through  the  canal,  and  that  they  would  not  be  lowered 
by  any  general  competition. 

Mr.  Hardy.  In  other  w^ords,  they  did  not  believe  that  the  railroads 
and  steamshij)s  would  comi)ete  with  each  other  if  they  were  owned 
by  the  same  parties? 

IVIr.  Mann.  1  know  myself  that  the  American-Hawaiian  Steamship 
Co.,  when  the  canal  was  opened,  lowered  its  rates  on  steel  to  30 
cents  j)er  100  or  $G  per  ton,  and  even  Avent  as  low  as  $5  per  ton 
or  25  cents  per  100  ])ounds,  and  then  the  railroads,  upon  application 
to  the  Interstate  (Commerce  Commission,  were  authorized  to  put  in 
low^  rates  on  iron  and  steel  and  many  other  products,  because  of  the 
heavy  movement  through  (he  canal,  aiul  that  the  commission  has  now 
leopened  those  cases  to  see  if  relief  can  not  be  allowed  from  those 
rates.  I  know  that  there  were  at  least  six  dilferent  lines  of  steamers 
operating  through  the  canal  prior  to  the  war.  but  now  all  of  them 
have  been  taken  away  because  of  those  high  charters.  I  lune  heard 
from  one  leading  shipowner  who  says  that  as  soon  as  this  war  is 
over  and  the  canal  is  open — as  it  is  now — the  competition  through 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  175 

the  canal  will  be  keener  and  stronger  than  was  ever  experienced  in 
coastwise  trade  before. 

Mr.  Hardy.  Is  it  your  opinion  that  railroads  can  possibly  actu- 
ally compete  with  steamship  lines  through  the  canal  ? 

Mr.  Mann.  Do  you  mean  if  they  do  not  own  the  steamers? 

Mr.  Hardy.  Can  they  actually  compete  with  a  steamship  line 
through  the  canal,  in  other  words,  can  you  carry  freight  as  cheaply 
from  New  York  to  San  Francisco  by  rail  as  3^ou  can  carry  freight 
by  water? 

Mr.  Mann.  That  is  generally  conceived  to  be  true;  and  I  believe  it 
to  be  true. 

Mr.  Hardy.  Of  course,  so  far  as  I  am  concerned,  I  say  to  you  that 
that  is  a  condition  which  I  think  ought  to  be  regarded.  I  do  not 
think  the  railroads  ought  to  be  allowed  to  rob  interior  points  in 
order  to  make  fictitious  com]3etition  at  seaboard  ports,  or  a  competi- 
tion which  can  not  possibly  be  real 

Mr.  Mann  (interposing).  Of  course,  that  involves  the  long-and- 
short-haul  clause. 

Now,  the  Panama  Canal  act,  perhaps,  unnecessarily,  but,  at  any 
event,  specifically  makes  the  Sherman  Act  applicable  to  vessels  oper- 
ating through  the  Panama  Canal,  therefore,  there  is  no  question 
that,  so  far  as  any  combinations  of  the  kind  or  character  that  have 
been  referred  to  are  concerned,  the  Department  of  Justice  may  im- 
mediately take  control  and  stop  them,  because  all  of  those  vessels 
operating  in  the  coastwise  traffic  are  thoroughly  and  completely 
under  the  control  of  the  United  States  authorities.  Now,  so  far  as 
the  railroads  are  concerned,  you  asked  if  they  do  not  have  the  same 
rates  from  Chicago  to  Portland,  Seattle,  and  Los  Angeles?  Yes; 
they  do.  Then,  you  asked,  "  Don't  they  meet  together  and  agree 
on  those  rates?"  Yes;  they  do,  and  that  is  illegal.  That  is  unlawful, 
and  it  has  been  held  to  be  so  in  the  trans-Missouri  case  and  in  a 
number  of  other  cases.  President  Taft,  when  the  railroads  proposed 
to  agree  to  advance  the  rates  from  Chicago  to  intermediate  points, 
had  a  bill  drawn  up  by  the  Department  of  Justice  under  the  Sherman 
Antitrust  Act;  it  was  filed  in  court  and  served  upon  the  railroad 
carriers,  and  it  said  to  them :  "  We  are  going  forward  now  with  this 
proposition  under  the  Sherman  Antitrust  Act  and — unless  you  vol- 
untarily continue  and  extend  the  effective  date  of  your  filed  tariffs — 
until  there  can  be  a  hearing  before  the  Interstate  Commerce  Com- 
mission and  a  determination  made  thereon  as  to  whether  you  can 
justifiably  advance  these  charges  or  not,  we  will  proceed." 

The  railroads  yielded ;  they  did  not  want  to  try  that  question,  be- 
cause there  was  no  question;  there  was  no  question,  because  it  had 
been  decided.  An  agreement  with  respect  to  rates  may  be  tacitly  per- 
mitted to  continue  because  of  the  necessities  of  the  case 

Mr.  Hardy  (interposing).  You  admit  that  such  agreements  should 
be  the  subject  matter  of  regulation.  I  have  some  doubt  about  the 
effectiveness  of  it,  but  we  should  hang  onto  whatever  advantage  we 
have.  There  have  been  instances  in  which  railroads  charged  three 
or  four  times  as  much  under  supposed  regulation  than  they  did  where 
they  had  real  water  competition.  Therefore  I  do  not  think  that  that 
regulation  amounts  to  very  much,  but  it  is  the  best  we  can  do,  and  if 
there  is  anything  in  it,  let  us  get  it  by  all  means. 


176  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Mann.  I  suppose  it  is  hardly  necessary  to  enter  into  a  defense 
of  the  great  work  of  the  Interstate  Commerce  Commission.  Of 
course,  the  Supreme  Court  has  held  that  the  main  object  of  our  inter- 
state commerce  act  is  to  bring  about  equality  and  to  do  aAvay  with 
discrimination,  and  undoubtedly  that  is  the  principal  purpose.  Un- 
doubtedly 90  per  cent  of  the  discrimination  that  formerly  existed  or 
that  was  formerly  practiced  by  the  railroads  in  favor  of  persons  and 
f/laces,  particularly  in  the  granting  of  rebates  and  passes,  has  been 
wiped  out;  and  that  is  the  reason  why  the  railroads  are  able  to  earn 
revenues  sufficiently  large  to  pay  good  dividends  to  their  stockholders, 
notwithstanding  the  fact  that  their  rates  have  been  reduced  by  many 
millions  of  dollars  throughout  the  whole  United  States.  They  are 
«ble  to  pay  dividends,  notwithstanding  the  lowering  of  their  rates, 
l.ecause  they  are  not  permitted  to  give  any  more  rebates  or  passes. 
The  result  is  that  they  are  able  to  clo  business  and  make  money  at  a 
less  rate.  Now,  as  to  the  proposition  that  the  railroads  of  the  United 
States,  generally  speaking,  charge  rates  that  are  very  materially 
higher  than  reasonable  rates,  I  want  to  say  that,  as  a  general  propo- 
sition, it  is  my  opinion  that  that  is  not  the  fact.  There  are,  of  course, 
many  cases  where,  on  special  commodities,  we  say  that  the  railroad 
rates  are  unreasonably  high,  and  Ave  are  fighting  them  on  it  all  the 
time 

ISIr.  Hardy  (interi)osing).  If  a  railroad  charges  just  three  times 
as  much  for  hauling  a  commodity  half  the  distance  as  they  charge  for 
hauling — not  the  same  character  of  commodity,  but  the  same  com- 
modity— for  twice  the  distance,  would  you  think  that  an  inireason- 
able  charge  or  practice? 

Mr.  Mann.  I  should  not  be  suri)rised  to  find  a  larger  charge  for 
the  shoi'ter  than  for  the  longer  distance,  although  it  does  seem  to  me 
that  the  relationshij-*  of  three  to  one  is  unduly  high. 

Mr.  Hardy.  But  that  does  actually  apply  to  the  biggest  commodity 
in  my  State. 

INIr.  Mann.  You  should  appeal  to  the  Interstate  Commerce  Com- 
mission. 

Mr.  Hardy.  We  have  appealed  to  the  State  railroad  commission, 
and  they  did  not  relieve  us. 

Mr.  Mann.  Louisiana  got  some  relief  in  the  Shreveport  case. 

The  Chairman.  I  have  before  me  tariffs  Nos.  23,  24,  and  26  of  the 
Eastern  Steamship  Corporation,  giving  their  interdivision  and  joint 
passenger  tariffs  of  one-way  and  round-trip  fares  from  New  York 
City  to  destinations  in  Maine,  Massachusetts,  New  Hampshire,  and 
Vermont,  in  the  United  States,  and  New  Brunswick,  Newfoundland, 
Nova  Scotia,  Ontario,  and  Quebec,  in  Canada,  and  also  from  Boston, 
Mass.,  and  Portland.  Me.,  to  destinations  in  Delaware,  District  of 
Columbia,  Florida,  Geoi-gia,  Illinois,  Kentucky,  Louisiana,  Mary- 
land, Missouri.  New  Jersey,  New  York,  North  Carolina,  Ohio,  Penn- 
sylvania. South  Carolina,  and  Virginia,  which,  of  course,  have  been 
approved  by  the  Interstate  Commerce  Commission.  Now,  you  say 
that  it  is  in'ipracticable  to  regulate  rates  in  the  coastwise  trade,  and 
yet  the  Intei-state  Commerce  Commission  is  doing  it. 

Mr.  Mann.  Yes,  sir;  in  this  way 

The  Chairman.  Just  the  other  day  some  steamship  companies  pro- 
posed to  increase  their  rates  15  per  cent,  and  the  Interstate  Commerce 
Commission  would  not  permit  it.    Now,  do  you  not  suppose  that  any 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  177 

commission  or  board  organized  under  the  terms  of  this  bill,  or  the 
board  that  we  are  proposing  to  create  here,  could  exercise  the  same 
good  sense  and  discretion  Avith  reference  to  that  subject  that  the 
Interstate  Commerce  Commission  is  exercising  now  in  regard  to  that 
traffic  which  is  in  part  rail  and  in  part  w^ater  where  they  are  joint 
routes  and  services? 

Mr.  Mann,  The  answer  there,  as  I  see  it,  is  this,  that  the  rail  car- 
riers do  not  make  through  routes  and  joint  rates  with  water  carriers 
unless  those  water  carriers  are  what  are  called  regular  lines.  I  never 
heard  of  a  through  route  and  joint  rate  being  established  with  any 
but  a  regular  line.  That  is  the  reason,  as  I  understand  it,  wdiy  the 
interstate-commerce  act  gives  the  commission  jurisdiction  over  rates 
on  traffic  moving  partly  by  rail  and  partly  by  water,  under  common 
ownership  or  control 

The  Chair:max  (interposing).  They  can  charge  a  less  rate  if  they 
want  to.  We  are  not  interfering  with  their  activities  in  that  direc- 
tion at  all,  nor  are  we  doing  anything  to  prevent  them  from  making  a 
lower  rate.  In  any  event,  we  will  not  undertake  to  do  more  than  to 
supervise  it  so  as  to  prevent  discriminations  and  prescribe  the  maxi- 
mum rate.  That  is  what  the  Interstate  Commerce  Commission  is 
doing  to-day  Avith  respect  to  water  lines  that  have  joint  traffic  ar- 
rangements with  railroad  companies. 

Mr.  Mann.  My  understanding  of  the  act  was  that  it  would  apply 
to  any  owner  of  any  ship.    This  bill  provides — 

That  every  coimnoii  carrier  by  water  in  interstate  commerce  shall  establish, 
obsei've,  and  enfoice  in  intei-state  commei-ce  just  and  reasonable  rates,  fares, 
and  charges  and  just  and  reasonable  regulations  and  practices  affecting  classifi- 
cation, rates,  or   tariffs,   etc. 

The  same  provision  is  made  with  respect  to  foreign  commerce. 

The  Chairman.  Not  the  same. 

Mr.  Mann.  It  is  similar.    The  bill  provides — 

That  whenever,  after  full  hearing  upon  a  romplaint,  or  under  an  order  for 
investigation  ma<le  by  the  board  on  its  own  initiative,  the  board  shall  be  of 
opinion  that  any  rates  or  charges  demanded,  charged,  or  collected  by  any  com- 
mon carrier  by  water  in  foreign  commerce  are  unreasonably  high,  or  unjustly 
discriminatory  between  shippers  or  ports,  or  unjustly  prejudicial  to  exporters 
of  the  United  States  as  compared  witli  their  foreign  competitors,  or  represent 
an  unjust  relation  between  classes  of  commodities,  the  board  is  herel>y  em- 
powered to  determine  and  prescribe  what  shall  be  the  just  and  reasonable  rates 
and  charges  to  be  thereafter  observed  as  the  maximum  to  be  charged,  and  to 
make  an  order  that  such  carrier  shall  cease  and  desist  from  publishing,  de- 
manding, or  collecting  any  rate  or  charge  in  excess  of  the  prescribed  maximum. 

Now,  this  act  follows  the  plan  of  the  interstate  commerce  act  in 
requiring  interstate  vessels  and  foreign  vessels  to  file  their  rates  and 
charges  with  the  commission  and  not  to  deviate  from  those  rates  and 
charges  except  upon  the  authority  of  the  commission,  or  upon  filing 
new  rates  upon  10  days'  notice 

The  Chairman  (interposing).  There  is  not  a  word  in  there  to  the 
effect  that  the}^  can  not  reduce  their  rates — not  a  w^ord. 

Mr.  Hadley.  I  call  attention  to  the  language  in  line  18,  page  11. 

Mr.  Mann.  It  provides  that  no  increase  shall  be  made.  The  pro- 
vision on  page  11,  from  line  15  to  line  18,  reads  as  follows : 

No  increase  shall  be  made  by  such  carrier  in  the  rates,  fares,  and  charges,  or 
joint  rates,  fares,  and  charges  which  have  been  filed  in  compliance  with  the 

38.534—16 12 


178  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

requirements  of  this  section,  except  after  10  days'  notice  to  the  board,  which 
notice  shall  plainly  state  the  increase  proposed  to  be  made. 

Now,  suppose  a  tramp  carrier  has  filed  its  rates,  as  the  hiw  re- 
quires, and  then  it  lowers  its  rates.  It  must,  of  course,  file  its  rates 
in  order  to  loAver  them,  and  then,  in  order  to  get  the  rates  up  again 
to  the  maximum  which  they  are  allowed  to  charge,  the  carrier  must 
give  10  days'  notice  to  the  board.  In  other  words,  any  change  by 
way  of  lowering  a  rate  must  be  made  by  filing  the  rate,  which  is  the 
same  rule,  if  the  chairman  please,  that  applies  to  railroad  companies 
at  the  present  day.  I  suppose  there  are  thousands  of  tariffs  filed 
every  day  with  the  Interstate  Commerce  Commission  lowering  the 
rates  of  railroads.  The  railroads  file  the  tariffs  and  they  go  forward 
and  become  the  rat€  unless  some  objection  is  made.  If  a  shipper 
makes  objection,  the  commission  has  the  power  to  suspend  that  rate, 
whether  it  has  been  lowered  or  raised,  until  the  commission  can  in- 
vestigate the  justice  of  the  reason  for  lowering  or  raising  the  rate. 
Of  course  the  lowering  of  a  rate  may  produce  a  discrimination  that 
is  unjust  to  other  communities.  If,  however,  no  protest  is  made,  the 
rate  goes  into  effect  by  the  time  named  without  any  action  by  the 
Interstate  Commerce  Commission  at  all,  and  that  is  true  whether  the 
change  involves  a  lowering  of  the  rate  or  a  raising  of  the  rate.  Now, 
I  submit  that  this  provision  here  Avith  respect  to  vessels  is  substan- 
tially the  same. 

The  Chairman.  We  can  not  agree  about  that,  and  it  is  a  waste  of 
time  to  discuss  it. 

Mr.  Mann.  I  am  simply  calling  the  attention  of  the  committee  to 
my  construction  of  the  law. 

The  Chairman.  It  is  not  susceptible  to  that  construction,  to  my 
mind. 

Mr.  Mann.  Now,  in  conclusion,  so  far  as  my  statement  is  con- 
cerned— and  with  many  apologies  to  you  for  taking  up  so  much  of 
your  time — I  do  not  suppose  that  there  are  enough  people  in  the 
United  States  who  are  opposed  to  an  increase  of  the  American  mer- 
chant marine  to  be  entitled  to  the  designation  "  minority."  It  is,  of 
course,  the  practically  unanimous  desire  of  everyone  throughout  the 
United  States  to  see  the  American  merchant  marine  come  into  exist- 
ence. It  has  practically  no  existence  now  to  speak  of,  so  far  as  the 
over-sea  commerce  is  concerned.  The  figures  used  to  be  only  11  ships 
for  the  United  States  in  the  actual  over-sea  commerce — that  is  to 
say,  in  the  commerce  between  the  ITnited  States  and  Europe  or  the 
Orient— while  England  had  4,000,  Germany  2,000,  and  France  1,500. 

Those  numbers  have  not  been  materially  modified,  except  so  far 
as  the  war  has  affected  them  and  brought  some  vessels  under  Ameri- 
can registry.  Now,  then,  what  is  the  problem  and  what  is  the  solu- 
tion or,  rather,  what  is  the  solution  of  the  problem  we  have  been 
considering?  It  seems  to  me  we  can  not  solve  it  by  legislation,  but 
we  can  solve  it  perhaps  by  legislation  in  the  form  of  repeal.  It  is 
only  by  freedom  of  trade  upon  the  ocean  that  you  can  ever  expect, 
in  my  opinion,  to  bring  about  an  inci-ease  of  the  American  merchant 
marine.  I  think  that  we  can  all  look  with  a  great  deal  of  interest 
and  insti'uction  to  the  policy  of  England  in  this  regard.  She  has 
the  largest  number  of  ships  in  commerce  and  she  has  more  freedom 
a  thousand  times  than  Ave  liaA'e.    We  have  too  many  restrictions  that 


REGULATORY   FEATURES   OF    SHIPPING   BILL.  179 

have  been  imposed  ever  since  1846.  If  we  could  have  that  kind  of 
freedom,  I  believe  that  competition  upon  the  ocean  will  ultimately 
bring  about  the  desired  result.  Permit  me  to  advance  this  one 
thought,  because  it  concerns  our  American  merchant  marine  very 
closely,  particularly  in  coastwise  commerce. 

The  tolls  upon  the  Panama  Canal,  which,  I  am  sorry  to  say,  have 
been  imposed  upon  American  shipping  engaged  in  coastwise  com- 
merce, in  which  respect  I  must  seriously  differ,  together  with  Demo- 
crats of  high  standing,  with  the  President  of  the  United  States;  but 
be  that  as  it  may  and  to  one  side,  the  tolls  which  are  imposed  now 
upon  American  vessels  through  the  American  canal  at  Panama  are 
collected  upon  the  basis  of  the  net  tonnage  of  the  vessels  passing 
through.  The  net  tonnage  of  the  vessels  passing  through  the  Panama 
Canal  of  American  register  is  measured  according  to  the  American 
laws,  according  to  the  laws  of  Congress,  and  the  laws  of  Congress 
are  such  that  the  American  vessel  which  measures  5,000  tons  is  a  ship 
of  5,000  tons  when  it  comes  to  the  imposition  of  tolls  for  the  Panama 
Canal.  The  same  ship,  or  a  sister  ship  of  exactly  the  same  measure- 
ment and  same  inside  construction,  would  under  the  English  laws 
measure  only  4,000  net  tons.  I  state  that  upon  the  information  of 
shipping  men.    I  have  heard  it  many  times. 

The  Chairman.  Capt.  Dollar  is  your  authority? 

Mr.  Mann.   Yes;  and  Gen.  Goethals,  of  the  Panama  Canal. 

The  Chairman.  I  know  that  Capt.  Dollar  has  given  that  as  his 
opinion. 

Mr.  Mann.  It  is  true  that  Capt.  Dollar  has  said  that,  but  I  also 
mention  Gen.  Goethals,  who  made  that  statement  in  his  speech  before 
the  San  Francisco  Commercial  Club  last  year. 

The  Chairman.  That  must  be  the  ruling,  it  is  not  the  law? 

Mr.  Mann.  That  is  the  ruling  upon  which  they  are  collecting  the 
tolls. 

The  Chairman.  You  will  find  in  the  hearings  a  statement  by  Mr. 
Chamberlain,  the  Commissioner  of  Navigation,  in  which  he  says  that 
our  rules  are  the  same  as  the  English  rules.  I  agree  with  you  that 
in  the  past  there  must  have  been  some  inequality.  I  do  not  think 
that  this  claim  is  without  foundation,  but  just  where  the  difficulty 
was  I  confess  I  do  not  know.  Mr.  Greene  has  been  upon  the  com- 
mittee many  years  and  he  may  have  more  information  on  that 
subject. 

Mr.  Hardy.  We  have  all  agreed  that  it  should  not  be  so. 

The  Chairman.  No  American  shipowner  has  ever  come  before  this 
committee  and  presented  in  a  concrete  form  any  question  of  that 
sort. 

Mr.  Greene.  It  may  have  been  presented  before  the  Committee  on 
Interstate  and  Foreign  Commerce,  which  regulates  this  matter  of  the 
canal. 

Mr.  RoAVE.  Do  you  not  think  that  we  could  ascertain  the  situation 
from  Grace  &  Co.  ?  They  operate  both  American  and  English  ships 
through  the  canal.    I  will  write  to  them. 

Mr,  Hadley.  There  is  now  on  the  calendar  a  deck-load  bill,  re- 
ported from  the  Committee  on  Interstate  and  Foreign  Commerce. 

Mr.  Hardy.  A  bill  to  correct  the  condition  you  speak  of  would  be 
passed  through  this  committee  so  quickl}^  that  it  would  make  your 
head  swim. 


180  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Gkkene.  Why  not  have  the  clerk  to  the  committee  write  to 
W.  R.  Grace  &  Co.  ? 

The  CrrAii:MAN.  I  was  going  to  suggest  tliat  our  colleague  do  that 

Mr.  Mann.  With  the  chairman's  permission,  I  Avill  hend  to  the 
chairman  and  to  this  committee  a  statement  in  detail  upon  that  sub- 
ject, Avhich  has  been  prei)ared  by  the  maritime  department  of  the 
San  Francisco  Chamber  of  Commerce. 

Mr.  IIakdy.  The  first  time  that  statement  was  ever  made  before 
this  committee  it  struck  me — and  I  think  the  whole  committee — like 
a  clap  of  thunder  from  an  unseen  cloud.  None  of  us  had  ever  heard 
it  before.  It  was  stated  by  Mr.  Dollar  that  he  paid  $750  more  ton- 
nage dues  by  reason  of  the  American  measurement  than  if  it  had 
been  the  English  measurement  on  a  .ship  of  about  3,600  tons,  accord- 
ing to  my  recollection. 

Mr.  BuiiKE.  That  was  directly  contradicted  by  Gen.  IJhler  or  Mr. 
Chamberlain  before  this  committee  at  this  session. 

Mr.  Hardy.  I  asked  him  why  he  did  not  take  it  up  with  the  ad- 
ministrative department. 

Mr.  Hadley.  That  is  not  quite  my  recollection  of  the  force  of  Mr. 
Chamberlain's  statement. 

Mr.  Burke.  That  is  my  recollection. 

Mr.  Hardy.  It  was  never  claimed  by  anybody  before  us  that  we 
gave  any  advantage  to  the  vessels  of  any  other  nation,  but  that  we 
converted  their  measurements  into  our  measurements  when  they 
came  into  our  ports  for  the  purpose  of  charging,  and  that  in  the 
foreign  ports  where  the  vessels  went  that  they  accepted  the  certifi- 
cates of  the  port  because  it  w^as  to  their  interest  to  accept  it.  I  asked 
Mr.  Dollar  why  he  did  not  take  that  up  with  the  administration. 
Mr.  Chamberlain  in  his  statement  said  that  every  vessel  from  a  port 
of  the  ITnited  States  has  a  duplicate,  one  gi>'ing  the  net  measurement, 
and  another,  if  she  goes  to  England,  that  gives  the  English  meas- 
urement, and  that  under  our  treaty  rights  the  vessel  can  demand  the 
payment  of  the  dues  on  the  English  statement.  He  made  the  state- 
ment that  the  only  difference  between  the  charges  in  England  and 
America  rested  upon  the  fact  that  in  America  Ave  had  no  load  line, 
and  that  in  England  they  did. 

The  CirAiRMAN.  That  is  in  the  record.  Have  you  finished,  Mr. 
Mann? 

Ml'.  Manx.  Yes,  sir;  with  just  this  one  sentence.  I  have  men- 
tioned the  tonnage  measurement  luider  the  English  and  American 
laws  as  a  mere  illustration  or  incident  of  the  advantage  of  the  Eng- 
lish shipoAvnei-  as  against  the  American  shipowner,  and  that  is  only 
one  of  a  great  many.  If  we  are  going  to  im]:)ose  more  restrictions 
upon  OUT"  commerce  than  we  have  now  instead  of  less,  we  are  ap- 
j^roaching  unfreedom  instead  of  freedom. 

Mr.  Hardy.  You  are  doing  now  what  is  so  frequently  done,  you 
are  imdertaking  to  say  that  there  are  a  great  many  discriminations, 
but  every  man  who  says  that  finally  gets  down  to  one  discrimination 
and  says  that  it  is  one  of  a  great  number.  I  have  never  found  any 
other. 

Mr.  Mann.  I  shall  l)e  glad,  if  the  connnittee  will  indulge  me,  when 
I  get  back  to  San  Francisco,  to  furnish  that  information. 

Mr.  Hardy.  I  have  asked  a  number  of  the  witnesses  and  they  have 
never  answered  me. 

Mr.  Mann.  T  shall  be  fflad  to  make  a  memorandum. 


REGULATORY    FEATURKS    OF    SnTPPTXn    P.ILL.  181 

The  Chairman.  At  the  same  time,  please  consider  the  statement 
of  Mr.  Chamberhiin  made  before  the  committee  on  that  subject,  be- 
ginning on  page  196  of  the  hearings  on  H.  E.  10500. 

Mr.  Burke.  Mr,  Mann  has  reference  to  the  restrictions  that  he 
claims  should  be  repealed  in  the  interest  of  navigation,  as  I  under- 
stand ? 

Mr.  Hadley.  And  a  comparison  of  the  regulations. 

Mr.  Mann.  I  mean  the  restrictions. 

Mr.  Burke.  We  want  a  list  of  the  laws  that  you  consider  too  re- 
strictive and  the  repal  of  which  would  be  of  benefit  to  the  American 
merchant  marine. 

Mr.  Hadley.  That  necessarily  involves  a  comparison  of  the  com- 
panion regulations  of  other  countries. 

Mr.  Burke.  I  suppose  so.     I  want  to  see  the  laws. 

Mr.  Hadley.  I  want  to  see  also  the  comparison  with  other  regu- 
lations, so  as  to  help  to  support  the  conclusion. 

Mr.  Hardy.  You  were  getting  very  interesting  to  me  when  you 
spoke  of  freedom,  and  I  should  like  to  know  what  is  involved  in 
that  term  ? 

Mr.  Mann.  I  consider  that  Ave  are  inclined,  nowadays,  to  go  a 
little  mad  on  the  proposition  of  regulation.  Any  kincl  of  regula- 
tion is  a  restriction.  Any  kind  of  a  restriction  is  a  limitation  of 
freedom  and  liberty. 

Mr.  Hardy.  That  is  true;  but  you  want  to  repeal  restrictive  laws? 

Mr.  Mann.  Yes,  sir. 

Mr.  Hardy.  Not  laAvs  passed  nowadays,  but  laAvs  which  have  been 
on  the  statute  books  a  long  time.  Please  tell  us  what  laAvs  you  want 
repealed. 

Mr.  Mann.  I  am  not  prepared  now  to  point  to  a  particular  law, 
but  I  shall  be  glad  to  send  to  this  committee 

Mr.  Hardy  (interposing).  You  are  not  prepared  to  point  out  any 
particular  law  that  you  want  repealed? 

Mr.  Mann.  Yes,  sir.  I  will  point  to  some  provisions  of  modem 
laws. 

Mr.  Hardy.  Our  merchant  marine  was  destroyed  not  under  modern 
laws.  I  Avant  to  knoAv  the  laAvs  that  have  destroyed  our  merchant 
marine  and  the  ones  Avhich  you  want  repealed. 

Mr.  Hadley.  And  what  provisions  of  the  modern  laAvs  you  think 
should  be  repealed  if  we  are  to  benefit  the  merchant  marine? 

Mr.  Mann.  I  shall  certainly  include  both. 

The  Chairman.  All  ancient  and  modern  laws;  that  is  the  fair 
thing. 

Mr.  Mann.  I  will  read  the  protective  tariff  laws  of  the  United 
States  in  connection  therewith. 

Mr.  Hardy.  Read  the  one  which  provides  that  the  American  ships 
must  be  constructed  in  American  yards  alone.  Do  not  fail  to  put 
that  in. 

Mr.  Mann.  I  will  be  glad  to  do  so;  that  will  be  No.  1.  On  that 
proposition  there  is  a  strong  feeling  out  on  the  Pacific  Coast  that  we 
ought  to  be  allowed  to  buy  ships  of  foreign  registry  to  carry  lumber 
through  the  canal. 

Mr.  Hardy.  GiA^e  us  the  full  sentiment. 

The  Chairman.  We  are  much  obliged  to  you,  Mr.  Mann. 

Mr.  Mann.  I  thank  you  very  much  for  your  time  and  attention. 


182  EEGULATORY    FEATURKS    OF    SHIPPING    BILL. 

STATEMENT  OF  MR.  FRED  P.  GREGSON,  LOS  ANGELES,  CAL. 

Mr.  Gregson.  I  am  the  traffic  manager  of  the  Associated  Jobbers 
of  Los  Angeles  and  director  of  the  Pacific  Coast  Traffic  League.  The 
association  which  I  represent,  gentlemen,  is  rather  small — 150  mem- 
bers. That  association  of  150  members,  located  at  Los  Angeles,  possi- 
bly controls  about  TO  per  cent  of  the  tonnage  of  the  city,  the  tonnage 
handled  both  by  rail  and  by  water. 

I  have  followed  Mr.  Mann  very  carefully.  I  am  fully  in  accord 
with  everything  and  every  word  that  Mr.  Mann  has  set  forth  and 
stated.  Therefore,  it  would  be  useless  for  me  to  consume  over  one 
minute. 

I  Avant  to  clear  up  a  statement  made  by  the  chairman  that  the 
tariffs  of  the  steam  lines  were  upon  file  and  published.  Of  these 
150  large  receivers  of  freight  not  one  of  them  can  obtain  a  tariff 
either  of  the  American-Hawaiian  Steamship  Co.  or  of  the  Lucken- 
bach  Steamship  Co.,  or  the  W.  R.  Grace  Co.,  or  the  Atlantic  & 
Pacific  Steamship  Co.  The  tariffs  or  rates  can  only  be  had  upon  ap- 
plication. Sometimes  it  may  take  a  week  to  obtain  rates  upon  com- 
modities.    So  much  for  the  tariffs. 

The  Chairman.  I  said  that  they  were  filed  with  this  committee 
at  the  time  that  we  were  making  an  investigation  of  the  shipping 
trust. 

Mr.  Gregson.  I  beg  pardon.  I  misunderstood  you.  Neverthe- 
less, I  want  this  committee  to  know  that  these  rates  are  not  published 
rates  as  are  the  railroad  rates,  and  that  the  rates  may  be  had  only 
upon  application.  The  rates  are  always  not  alike.  There  is  not  an 
absolute  combination  which  has  been  spoken  of  here.  I  am  now 
speaking  from  the  standpoint  of  the  shipper,  the  man  who  handles 
the  rates  between  the  steamships,  the  railroad  companies  and  the 
large  shippers,  and  have  had  20  years  experience  in  both  the  steam- 
ship and  railroad  making  of  rates.  The  rates,  to  reiterate,  may  only 
be  had  upon  application  and  they  are  not  all  alike.  So  much  for  the 
rates. 

The  Chairman.  They  are  not  all  alike  and  the  big  shipper  has  a 
differential  over  the  small  shipper? 

Mr.  Gregson.  No,  sir;  not  the  big  shipper,  but  the  larger  tonnage 
and  the  time  and  place  of  shipment  may  be  the  j^revailing  factors. 
As  has  been  pointed  out  here,  there  are  seasons  when  the  ships  go 
back  east  rather  light  or  come  west  rather  light  and  at  those  seasons, 
where  the  traffic  is  light,  we  are  able  to  obtain  rates  that  are  not 
alike  from  certain  steamship  lines.  As  to  the  matter  of  tramp  lines, 
it  is  a  historical  fact  that  trade  only  follows  transportation  and  not 
the  reverse.  A  tramp  vessel  in  order  to  make  its  own  tonnage  will 
©ften  buy  cargoes  and  transport  those  cargoes  to  some  favorable 
port  and  sell  the  cargoes  after  arrival  at  that  port.  How  will  you 
regulate  a  proposition  of  that  kind?  A  proposition  of  that  kind 
should  not  be  regulated.  I  will  give  you  a  little  incident.  Just  be- 
fore the  breaking  out  of  the  war  an  English  vessel  arrived  at  Argen- 
tina with  a  cargo  of  merchandise,  not  a  regular  line— a  tramp — and 
loaded  her  with  corn  and  sought  a  market  on  the  Pacific  coast,  such 
as  could  be  obtained,  and  a  return  cargo  from  the  Pacific  coast. 
Now,  there  Avas  no  regularly  established  line.  There  was  no  regular 
rate  obtaining  from  Argentina  to  the  Pacific  coast  of  the  United 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  183 

States.  It  would  be  impossible  in  that  case  to  file  a  rate  with  a 
shipping  board;  and  it  would  be  impossible  for  the  ship  to  operate 
under  any  regulations  whatever. 

The  Chairman.  That  ship,  under  those  exact  circumstances, 
would  not  come  under  the  provision  of  the  bill. 

Mr.  Gregson.  I  do  not  so  understand  it.  All  ships  that  carry  for 
hire.  That  ship  carried  a  cargo  of  merchandise  to  Argentina  for 
various  parties  and  it  left  the  Port  of  Buenos  Aires  with  a  cargo  of 
corn  to  be  distributed  upon  the  Pacific  coast.  That  corn  was  sold 
to  various  parties. 

The  Chairman.  The  cargo  of  corn  was  its  own? 

Mr.  Gregson.  At  that  particular  time. 

The  Chairman.  That  is,  when  it  was  carried? 

Mr.  Gregson.  Yes,  sir;  but  it  was  sold  to  other  parties.  You  have 
mentioned  Capt.  Dollar  in  regard  to  how  foreign  commerce  is  built 
up.  Capt.  Dollar  himself  with  his  own  capital,  carrying  for  hire 
through  freight,  will  purchase,  in  order  to  make  his  entire  tonnage 
from  China,  a  hundred  or  possibly  a  thousand  tons  of  Chinese  pig 
iron. 

Mr.  Hardy.  It  would  not  make  any  difference  what  the  rate  was 
on  his  own  property? 

Mr.  Gregson.  He  could  carry  tliat  for  nothing. 

Mr.  Hapj)y.  Or  he  could  carry  it  for  $1,000  a  ton  and  it  would  be 
the  same  thing? 

Mr.  Gregson.  Yes,  sir;  but  at  the  same  time  he  is  carrying  pig 
iron  for  hire  for  other  parties. 

Mr.  Hardy.  As  to  that,  he  may  be  a  common  carrier,  but  the  rate 
would  not  affect  his  own  goods? 

Mr.  Gregson.  It  may  be  the  shipowner's  purchase,  it  may  be  a 
speculator's  purchase,  it  may  be  my  own  purchase. 

Mr.  Hardy.  Do  3'ou  believe  that  he  should  be  permitted  to  charge 
one  speculator  one  rate  and  another  speculator  another  rate  ? 

Mr.  Gregson.  I  believe,  in  order  to  encourage  foreign  commerce 
and  trade,  he  should  be  permitted  to  make  any  rate  that  will  carry 
tonnage  and  fill  up  his  vessel. 

Mr.  Hardy.  You  have  now  reached  the  very  proposition  that  I 
want  to  pin  you  down  to.  There  is  a  vessel  at  Argentina  being  loaded 
with  corn  and  there  are  two  speculators  who  want  to  ship  freight  to 
the  United  States ;  your  idea  is  that  the  shipowner  should  be  allowed 
to  charge  one  speculator  $20  a  ton  and  the  other  one  $10  a  ton,  so  as 
to  prevent  the  one  speculator  from  getting  into  the  competition? 

Mr.  Gregson.  If  the  first  speculator  has  not  filled  the  ship's  bot- 
tom and  it  is  going  out  1,000  tons  light 

Mr.  Hardy  (interposing).  Let  us  leave  that.  Do  you  believe  that 
a  shipowner  should  be  given  the  privilege  of  saying  to  one  shipper, 
"We  will  charge  you  $20  a  ton,"  and  another  shipper  right  by  his 
side,  presumably  putting  the  material  in  the  same  hold  and  the  same 
partition,  if  need  be,  "  We  will  charge  you  $10  a  ton  "  ? 

Mr.  Gregson.  That  would  be  an  unfortunate  case,  and  it  may  be 
that  that  should  not  be  allowed. 

Mr.  Hardy.  Do  you  not  think  that  the  big  owners,  like  the  Steel 
Trust  and  other  people,  would  threaten  to  break  up  the  competition 
by  giving  certain  parties  favorable  rates? 

Mr.  Gregson.  That  might  be. 


184  REGT'I.ATOEY    FKATURES    OF    SHIPPTNr;    BIT.L. 

Mr.  Hardy.  Are  they  not  doing-  so? 

Mr.  Gregsox.  I  can  not  say. 

]Mr.  Hardy.  Does  not  that  action  result  in  these  companies  driving 
out  of  business  entirely  the  little  man  who  has  not  any  standino;  in 
the  world  by  holdin^^  over  their  heads  the  threat  that  they  will 
charge  the  big  shipper  a  smaller  rate,  and  then  charge  the  other 
fellow  enough  to  make  up  what  they  have  lost  on  the  big  shipper? 

Mr.  (iREGSOK.  There  is  one  way  to  get  around  that,  and  we  have 
done  it  in  California.    AVhen  you  speak  of  the  small  fellow ^ 

Mr.  Hardy  (interposing),  T  want  to  remove  that  from  the  record, 
just  discrimination. 

Mr.  Gregsox.  Regulation  would  prevent  that. 

]Mr.  Hardy.  You  are  opposed  to  any  regulation? 

Mr.  Gregsox.  I  am  absolutely  opposed  to  regulation  upon  the  sea. 
I  am  opposed  even  to  the  California  regulation,  but  there  is  pro- 
tection to  the  small  fellow.  "We  regulate  the  established  lines,  and 
under  that  provision  the  small  man  can  always  live. 

JNIr.  Hardy.  What  provision  is  that?  Preventing  the  regularly  es- 
tablished lines  from  discriminating? 

Mr.  Gregsox.  The  regularly  established  lines  in  California  are 
lines  operating  under  a  schedule.  Along  comes  a  small  steamer  in 
the  lumber  trade 

Mr.  Hardy  (interposing).  What  do  you  do  with  the  regularly  es- 
tablished lines? 

Mr.  Gregsox.  We  regulate  them. 

Mr.  Hardy.  But  3'ou  are  opposed  to  regulation? 

Mr.  Gregsox.  Personally,  yes. 

Mr.  Hardy.  Then  you  get  back  to  the  proposition  that  you  are  in 
favor  of  letting  the  shipowner  say  to  one  man,  "  I  am  going  to  dis- 
criminate against  you  until  T  drive  you  out  of  business;  that  is  what 
I  am  going  to  do." 

Mr.  Gregsox.  I  am  in  favor  of  this:  The  ships  should  be  allowed 
to  make  their  rates 

Mr.  Hardy  (interposing).  But  by  reason  of  your  regulation  in 
California  you  say  that  the  little  fellow  can  live? 

Mr.  (iregsox.  He  does  live. 

Mr.  Hardy.  Do  you  want  to  remove  that  regulation? 

Mr.  Gregsox.  No,  sir;  not  at  the  present  time.  Under  this  act  you 
will  kill  the  little  fellow  and  3'OU  will  kill  what  we  are  trying  to 
build  up. 

Mr.  Hardy.  Either  you  want  to  remove  the  regulation  or  you  do 
not — you  want  to  kill  the  little  man  or  you  do  not. 

The  CiiAiRMAx.  You  have  a  State  law  in  California  to  regulate  the 
water  lines  engaged  in  intrastate  commerce? 

Mr.   Gregsox.  Yes,  sir. 

I  will  agree  with  you,  Mr.  Hardy,  you  have  asked  a  very  embar- 
rassing question. 

Mr.  Hardy.  Is  it  not  the  whole  of  the  proposition  involved  in  this 
bill  that  we  have  asked  you? 

Mr.  Gregsox.  No;  as  I  understand  this  bill  it  is  to  regulate  all 
transportation  by  water,  interstate  or  foreign  commerce.  I  am  try- 
ing to  point  out  that  under  the  operations  of  a  tramp  steamer  you  can 
not  regulate 


KEGULATOEY    FEATURES    OE    SHIPPING    BILL.  185 

Mr.  Hakdy  (interposing).  We  are  going  to  agree  with  you  about 
the  fellow  w^ho  bought  his  own  cargo  down  in  Argentina  and  brought 
it  up  here  in  his  own  vessel.  We  can  not  say  what  he  shall  charge 
himself. 

Mr.  Gregson.  Whether  lie  bought  the  cargo  or  not,  to  my  mind  or 
to  the  mind  of  any  business  man,  you  can  not  regulate  a  tramp 
steamer  in  foreign  trade. 

The  Chairman.  Did  you  ever  hear  of  a  tramp  steamer  charging  a 
higher  rate  than  the  regular  line  ? 

Mr.  Gregson.  Yes,  sir;  I  have. 

The  Chairman.  Could  you  give  us  an  instance  of  that  sort  ? 

Mr.  Gregson.  I  can  not  give  yon  a  concrete  instance,  but  I  have  a 
number  of  them  in  mind.  A  tramp  steamer  lives  upon  that  very 
proposition.  A  tramp  steamer  takes  advantage  of  markets  and  ship- 
ping conditions.  He  may  go  into  a  port  where  regular  established 
steamer  lines  have  rates  back  and  forth,  and  he  may  go  into  that  port 
and  find  the  wharves  with  plenty  of  .tonnage  and  no  bottoms  in  port, 
and  he  may  go  into  that  port  under  those  conditions  and  make  his 
OAvn  rates,  which  may  be  several  times  higher  than  the  regular  estab- 
lished line  of  steamers. 

The  Chairman.  I  think  right  now  you  will  find  tramp  steamers 
getting  above  former  normal  rates  wdierever  they  are  needed. 

Mr.  Gregson.  Yes;  and  then  we  have  this  condition  on  the  Pacific 
coast:  I  really  believe,  gentlemen,  you  are  looking  more  toward  the 
great  Atlantic  coast  than  to  the  Pacific  coast.  We  of  the  Pacific 
coast  are  very  3'oung,  and  that  is  especially  true  of  Los  Angeles.  We 
have  only  had  a  port  a  very  few  years;  in  fact,  it  is  still  under  con- 
struction. We  have  spent  many  million  dollars  there  in  trying  in 
every  way  to  encourage  foreign  trade.  I  think  that  all  agree  that  in 
building  up  the  business  of  the  railroads  of  the  United  States  the 
business  was  built  up  without  regulation — that  is,  at  the  beginning — 
before  the  tonnage  of  the  United  States  became  so  dense  that  there 
was  sufficient  and  ample  for  all.  At  that  time,  then  there  came  regu- 
lation. That  is  so  with  the  steamers.  If,  after  a  time,  the  tonnage  be- 
comes so  dense  that  the  business  is  built  up,  then  we  may  talk  of 
some  scheme  of  regulation,  where  each  port  of  the  country,  each 
source  of  tonnage  has  been  established  permanently.  But  in  the  case 
of  the  tramp  steamer,  he  tramps  around  the  world  and  picks  up  ton- 
nage wherever  he  may  find  it,  and  he  should  be  permitted  to  operate 
without  being  trammeled. 

Mr.  PIadley.  I  would  like  to  ask  you  a  question.  You  have  started 
to  make  several  statements  and  have  been  interrupted  and  I  will  not 
go  back  to  them.  I  also  come  from  the  Pacific  coast  and  I  am 
interested  in  all  coasts. 

Mr.  Gregson.  Let  me  extend  you  an  invitation  to  Los  Angeles. 

Mr.  Hadley.  I  have  seen  your  harbor  and  your  port.  I  know  the 
situation  and  appreciate  what  you  are  saying.  I  want  to  know  what, 
in  your  view,  will  be  the  effect  of  the  operation  of  this  bill,  if  en- 
acted into  laAv,  upon  the  Pacific  coast  business,  and  why. 

Mr.  Gregson.  As  I  stated  just  a  moment  ago,  we  are  young,  and 
we  are  building  up  a  business.  In  order  to  build  up  that  tonnage 
w^e  should  be  left  untrammeled  as  trade  follows  transportation.  The 
transportation  lines  seek  sources  of  trade  for  us.  They  will  go  into 
China  and  go  into  all  the  obscure  ports  of  the  world  with  our  com- 


186  EEGULATORY    FEATURES    OF    SHIPPING    BILL. 

missions,  saying  that  we  will  charge  you  something  reasonable. 
They  bring  it  to  onr  port  and  we  take  it  from  them.  That  has 
opened  up  a  certain  line  and  established  a  source  of  s-upply.  On  the 
other  hand,  if  rates  and  regulations  are  made  from  this  port  to  that 
port  and  for  all  ports  of  the  world,  the  steamers  will  cease  to  be 
free  lances  and  will  say,  ""'We  can  not  possibly  operate  under  this  or 
under  that  condition  unless  we  have  from  you  a  certain  guaranteed 
amount  of  tonnage."  Under  those  conditions,  that  would  mean  we 
Mould  have  to  take  the  venture  and  reverse  the  order  of  things  and 
have  transportation  follow  the  trade  instead  of  the  trade  following 
transportation.  That  is  about  as  good  an  answer.  I  think,  as  T  can 
give. 

Mv.  Hadlet.  And  you  think  that  would  cripple  the  marine  busi- 
ness instead  of  increasing  it? 

Mr.  Gregsox.  I  think  it  would.  Another  proposition  is  this:  A 
large  steamer  of  10.000  tons  has  a  great  advantage  over  a  smaller 
steamer.  For  instance,  we  take-  from  the  Pacific  coast  to  the  Atlantic 
€oast  cargoes  of  grain  at  certain  times  and  under  certain  market 
conditions.  We  can  not  wait  for  10  days  to  file  our  tariffs.  We  carry 
lumber  from  the  Pacific  coast  through  the  canal,  and  we  can  not 
wait,  in  each  instance,  to  file  our  tariffs.  A  small  steamer  goes  back 
empty.  If  he  must  file  tariffs  covering  certain  rates  he  will  never 
get  a  cargo.  He  has  got  to  be  left  open  and  has  to  be  left  free.  That 
is  the  other  condition. 

STATEMENT  OF  MR.  S.  J.  WETTRICK,  ATTORNEY  AT  LAW, 
SEATTLE,  WASH. 

The  Chairman.  Please  give  your  name  and  profession. 

Mr.  Wettrick.  S.  J.  Wettrick;  attorney. 

The  Chairman.  Are  j^ou  appearing  here  as  attorney? 

Mr.  Wettrick.  I  am  appearing  here  as  attorney.  I  am  regularly 
the  attorney  for  the  transportation  department  of  the  new  Seattle 
Chamber  of  Commerce,  and  am  here,  as  Mr.  Mann  has  stated,  on  the 
transc(!ntinental  rate  situation  which  is  up  before  the  Interstate  Com- 
merce Commission  and  to  represent  the  chamber  of  commerce  at  this 
hearing  here. 

If  we  are  not  trespassing  too  much  upon  the  time  of  this  com- 
mittee, I  just  want  to  say  a  fcAV  words.  There  is  very  little  to  add 
to  what  has  already  been  said  from  the  standpoint  which  Ave  take 
out  on  the  coast. 

I  am  frank  to  say  I  have  net  given  this  matter  any  detailed  study 
or  consideration.  I  was  asked  by  wire  yesterday  to  appear  before 
this  couunittee,  and  I  knew  before,  of  course,  that  the  chamlier  of 
commerce  in  Seattle  had  consistently  opposed  regulation  along  this 
line:  and  in  connecticm  with  my  work  there  for  the  cjiamber  of  com- 
merce we  have  fre(iuently  cimsidered  these  ((uesti(His  and  have  always 
felt,  as  we  feel  now,  that  it  would  result  in  xevy  serious  harm  a_nd 
injury  to  the  Pacific  coast  seaports  if  we  Avere  to  i)lace  u]Km  marine 
transportation  a  strait-jacket  such  as  is  proposed  by  this  bill. 

The  Chairman.  The  Commercial  Club  of  Seattle  and  the  chamber 
of  commerce  do  not  agree  on  that  point,  do  thev? 

Mr.  Wettrick.  Upon  that  ]5oint  I  will  say,  Mr.  Chairman,  that  if 
the  cviinmercial  club  were  informed  upon  this  question — I  Avill  go 


REGULATORY    FEATURES    OF    SHIPPING    BILL.  187 

further  than  that  and  say  that  if  they  were  organized  as  the  Seattle 
Chamber  of  Commerce  is  organized,  Avith  departments  operated  at 
great  expense,  and  with  men  in  their  employ  whose  duty  it  is  to 
study  these  questions,  and  could  see  far  enough  to  realize  what  it 
would  mean,  they  would  be  taking  the  same  stand  as  the  Seattle 
Chamber  of  Commerce.  I  make  that  prediction,  and  I  say  that  be- 
cause we  are  in  great  danger  all  the  time  up  on  Puget  Sound.  Seattle 
is  getting  to  be  a  port  of  considerable  size.  We  are  now  the  fourth 
customs  district  in  the  country.  We  have  got  to  depend  to  a  large 
extent  upon  our  shipping.  Congressman  Hadley,  who  sits  over  there, 
is  from  Bellingham,  near  the  Canadian  border,  and  I  am  wondering 
what  will  happen  if  we  get  a  board  which  begins  to  fix  steamship 
rates  in  the  coastwise  trade  or  to  and  from  Seattle  and  ports  in  the 
Orient  that  are,  we  Avill  say,  so  low  that  the  steamship  companies  do 
not  care  to  engage  in  the  traffic,  or  else,  if  they  do  continue,  they 
will  find  that  they  can  charge  other  and  different  rates  to  British 
Columbia  ports  and  will  land  their  goods  there  and  then  bring  them 
into  this  country  by  rail. 

Mr.  Hadley.  I  asked  that  question  of  a  witness  the  other  day  and 
I  would  like  to  know  what  you  think  would  happen. 

Mr.  Wettrick.  I  think  that  much  the  same  would  happen  as  has 
happened  in  connection  with  some  other  shipping  regulations  w^e 
have  had,  and  I  have  in  mind  now,  for  instance,  the  seaman's  bill 
Avhich — Avhether  the  gentlemen  of  this  committee  understand  it  or 
not — is  a  serious  detriment  to  our  Pacific  coast  shipping  ports,  and 
there  is  not  any  question  about  that. 

Mr.  Hardy.  I  w^ish  you  Avould  keep  oft'  of  that  subject  because  I 
can  not  keep  off  of  it,  if  you  do  not. 

Mr.  Wettrick.  Yes;  right  in  this  connection,  one  of  the  speakers 
here  was  asked  to  mention  a  number  of  shipping  laws  Avhich  are  said 
to  be  restrictions 

Mr. Hardy  (interposing).  And  I  will  ask  you  that  question,  but 
I  w^ant  you  to  confine  it  to  a  time  Avhen  they  were  not  complaining 
of  the  seamen's  bill,  because  we  have  had  no  merchant  marine  for  a 
number  of  years,  and  we  might  just  as  w^ell  leave  out  the  seaman's 
act  because  of  course  that  did  not  kill  our  merchant  marine,  because 
it  was  already  dead. 

Mr.  Wettrick.  I  understood  a  moment  ago  that  you  excluded 
from  Avliat  you  wanted  the  speaker  to  advert  to  the  seaman's  law^ 
because  it  is  modern  history. 

Mr.  Hardy.  Yes. 

Mr.  Wettrick.  But  I  was  going  to  say  this :  I  have  in  mind  the 
law  AA'hich  proAades  that  foreign  steamships  shall  not  engage  in  the 
ooastAvise  trade.  I  am  frank  to  say  I  haAe  not  given  the  question 
enough  consideration  to  see  all  the  things  that  to  open  the  coastwise 
trade  to  them  might  lead  to,  and  I  am  not  expressing  a  personal 
opinion  because  I  Avant  to  give  the  matter  more  consideration  before 
1  do. 

Mr.  Hardy.  On  that  subject  you  and  I  are  together,  I  hope. 

Mr.  Wettrick.  I  came  across  the  continent  Avith  a  man  Avho  rep- 
resented the  Anderson  Steamship  Co.  of  NorAvay,  a  Mr.  Hitching, 
from  NeAV  York,  the  representative  of  that  company  on  the  Pacific 
coast.  I  understand  they  haA^e  some  50  or  60  steamers  all  engaged 
in  the  tramp  service,  and  Mr.  Hitching  said  to  me — how  true  it  is 


188         REGULATORY  ■  FEATURES  OF  SHIPPING  BILI,. 

I  do  not  know — that  the  United  States  would  never  develop  a  mer- 
chant marine  until  they  did  open  up  the  coastwise  trade  to  foreign 
steamers.  If  he  did  not  put  it  that  way  he  put  it  this  way,  and  I 
think  this  is  perhaps  more  nearly  correct — that  if  we  removed  that 
restriction  Ave  would  not  be  talking  all  the  time  about  "  What  is  the 
matter  with  our  merchant  marine,"  and  what  we  should  do  in  order 
to  get  a  merchant  marine, 

Mr.  Hardy.  1  agree  with  him  fully. 

Mr.  Wettrick.  Now,  further,  I  had  in  mind  the  law  which  pro- 
vides that  a  foreign-built  steamship  can  not  secure  American  registry 
or  fly  the  American  flag. 

Mr.  HAHor.  I  do  not  go  as  far  as  your  man  did,  but  I  say  let  our 
own  people  buy  these  ships  wherever  built  and  put  them  under  the 
American  flag  and  make  them  a  part  of  our  merchant  marine  to  sail 
in  the  coastwise  trade  and  in  the  over-seas  trade  just  as  they  see 
proper. 

Mr.  Wettrtck.  You  would  be  in  favor  of  that  ? 

Mr.  Hardy.  Certainly;  and  you  would  not  need  any  further  free- 
dom, either. 

Mr.  Wettrick.  1  do  not  think,  Mr.  Hardy,  that  there  is  any  danger 
of  them  doing  that  if  we  enact  the  law  we  have  under  consideration 
here,  even  though  the  other  restriction  should  be  removed. 

Mr.  Hardy.  Right  there  I  will  just  give  you  this  suggestion.  A 
vessel  of  10,000  tons  is  starting  from  New  York  to  Hongkong  by  way 
of  the  canal,  passing  en  route  San  Francisco  or  Seattle.  Under  the 
law  that  you  say  you  are  in  favor  of  and  Avhich  I  am  very  much  in 
favor  of  and  always  have  been  in  favor  of,  that  vessel,  if  it  did  not 
get  a  full  load  from  Hongkong  to  New  York,  could  take  half  of  its 
cargo  in  freight  to  San  Francisco,  and  then  at  San  Francisco  get  the 
balance  of  its  cargo  and  go  on  to  Hongkong.  In  that  w^ay  it  could 
earn  possibly  $50,000  more  in  freight  from  New  York  to  San  Fran- 
cisco than  she  could  under  the  present  law  under  wdiich  it  is  forbid- 
den to  take  an  ounce  of  freight  from  New  York  to  San  Francisco. 
Instead  of  talking  about  a  subsidy,  if  you  will  give  our  merchant 
marine  the  privilege  of  carrying  that  kind  of  freight,  and  then  give 
them  just  as  cheap  a  ship  as  they  can  get  anywhere  in  the  world  they 
can  compete.  It  is  larger  than  almost  any  subsidy  ever  proposed,  so 
far  as  that  is  concerned,  and  it  relieves  the  pressure  and  the  con- 
gestion which  is  existing  at  every  seaport  town  or  which  has  been 
existing,  and  it  would  give  us  more  cargo  space  on  carrying  vessels, 
and  would  be  the  thing  you  people  need,  if  you  have  the  nerve  to  face 
the  shipbuilding  people  of  this  country  and  say  you  want  free  ships. 
That  is  what  you  want  in  this  country. 

Mr.  Wettrick.  Do  you  know  what  I  have  wished  in  this  connec- 
tion? I  have  wished  that  instead  of  proposing  and  considering  \n\U 
such  as  wo  have  here,  a  bill  which  a  person  can  not  read  Avithout 
thinking  of  thousands  of  questions  that  are  going  to  arise  that  no 
one  noAv  foresees  or  can  foresee,  that  if  Ave  had  a  commission  which 
would  start  in  at  the  bottom  and  go  oA^er  our  ancient  nierchani- 
marine  laws  and  shipping  laAvs,  study  them  up  to  the  present  time, 
and  w^ork  up  something  in  a  constructive  way 

Mr.  Hardy  (interposing).  Noav,  let  me  stop  you  right  there.  We 
have  had  the  strongest  legal  talent  representing  shipping  interests 
and  other  interests  there  is  in  this  country,  having  studied  this  ques- 


KEGULATORV    FEATURES    OF    SHIPPING    BILL.  189 

tion.  to  come  before  us.  and  T  have  asked  every  one  of  them  to  point 
out  some  restrictive  hnv  which  has  hurt  our  merchant  marine,  and 
no  one  has  e\er  pointed  out  more  than  two  restrictions.  One  is  this 
measurement  business  which  was  spoken  of  here;  and  then  they  point 
out  the  other  one.  which  you  are  talking  about  now,  which  is  the  re- 
svti'iction  whicli  prevents  an  American  merchant  from  getting  a  ship 
as  cheaply  as  his  competitoi".  Outside  of  that  there  is  not  a  restrictive 
law.  I  have  asked  them,  ''•  Is  there  any  restriction  on  the  statute 
books  that  you  have  ever  sought  to  have  repealed,"  and  they  have 
said.  "  No." 

In  50  years  the  shipping  interests  have  not  asked  for  the  repeal  of 
a  single  restrictive  law;  but  just  as  soon  as  w^e  passed  the  seaman's 
law^  they  say  that  that  causes  the  death  of  the  merchant  marine, 
wlien  the  blame  thing  was  dead  50  years  ago,  and  we  have  been  seek- 
ing some  remedy,  because  w^e  fear  we  can  not  meet  the  forces  of  the 
opposition;  and  I  will  admit  that  it  is  patchwork  and  the  hope  is 
light,  but  Ave  can  not  start  it  any  other  way.  If  you  people  who 
have  studied  the  thing  will  simply  spead  the  news  and  let  the  people 
of  this  country'  know  that  we  are  ridden  by  an  "  old  man  of  the  sea  " 
who  has  been  on  the  back  of  the  commerce  of  this  country  for  50 
years  and  you  can  not  stir  him;  you  can  not  shake  his  grasp,  because 
so  few  people  Avill  even  mention  it,  then  w^e  may  be  able  to  accom- 
plish something,  and  that  is  why  I  wanted  my  friend  Mann  to  go  a 
little  fui-ther. 

Mr.  AVettrick.  May  I  ask  what  this  "  old  man  of  the  sea  "  is? 

Mr.  Hardy.  It  is  the  law  which  compels  the  American  merchant 
when  he  tries  to  compete  with  his  foreign  competitor  to  l)uy  his  ship 
in  an  American  shipyard  and  pay  from  50  to  100  per  cent  more  than 
his  competitor,  and  therefore  he  can  not  compete.  If  you  had  to 
pay  twice  as  much  for  your  horse,  you  could  not  ride  in  opposition 
vviith  me  in  any  kind  of  service;  and  here  you  have  got  a  horse  wdiich 
carries  the  commerce  of  the  United  States;  and  if  the  man  who 
wants  to  carry  it  wants  to  carry  it  mider  our  flag,  he  has  to  pay  two 
prices,  and  consequently  he  will  not  put  it  under  our  flag. 

Mr.  Hadley.  I  started  to  ask  the  witness  a  question  and  he  started 
to  answer,  and  then  happened  to  mention  the  seaman's  law,  a  very 
important  question,  and  was  sidetracked  and  did  not  answer  the  ques- 
tion at  all.  It  is  too  late,  perhaps,  to  go  into  that  now.  but  I  want 
to  ask  another  question.  Has  the  Seattle  Chamber  of  Commerce 
had  the  United  States  Chamber  of  Commerce's  referendum  before 
it  on  this  bill  like  the  San  Francisco  Chamber  of  Commerce  has; 
do  you  know  ? 

Mr.  Wettrick.  On  this  particular  bill,  Mr.  Hadley,  I  am  not  ad- 
vised. As  I  say,  I  just  received  a  telegram  from  them.  They  had 
one  on  the  shipping  bill. 

Mr.  Hadley.  Do  you  know  the  result  of  that  vote? 

Mr.  Wettrick.  As  T  noticed  in  the  published  report  of  the  hear- 
ings before  this  committee  wdiere  they  are  all  tabulated 

Mr.  Hadley.  That  is  the  old  bill.  No.  450. 

Mr.  Wettrick.  Yes.  I  understand  the  bill  now  under  considera- 
tion is  to  take  the  place  of  certain  sections  of  bill  10500  to  which  I 
have  just  referred. 

Mr.  Hadley.  Has  10500  been  referred  to  the  chamber  of  commerce'^ 

Mr.  Wettrick.  Yes,  sir. 


190  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Hadley.  Have  they  voted  on  that? 

The  Chairman.  The  tabulated  statement  in  the  record  gives  the 
vote  of  the  chamber  of  commerce. 

Mr.  Hadley.  Not  on  10500. 

Mr.  Wettrick.  Yes. 

Mr.  RowE.  That  is  what  they  testified  to  before  this  committee. 

Mr.  Wettrick.  That  is  what  I  referred  to.  Whether  this  question 
has  been  specifically  voted  on  or  not.  I  do  not  know.  As  has  been 
stated  here,  our  opposition  to  the  bill  and  the  purpose  of  our  appear- 
ance here  is  against  the  idea  of  regulating  steamship  rates. 

Now,  enough  has  been  said  probably  about  the  question  of  dis- 
crimination, but  even  discrimination  can  be  removed  without  regu- 
lating or  fixing  steamship  rates. 

Mr.  Hardy.  Without  any  legislation? 

Mr.  Wettrick.  And  furthermore,  I  want  to  say  this,  if  I  do  not 
say  anything  else,  and  that  is  there  is  no  perfection  anywhere,  as 
has  often  been  stated,  and  I  have  an  idea  that  when  we  are  met  as 
we  appear  before  this  committee  with  an  instance  here  and  an  in- 
stance there  of  where  discrimination  resulted  or  where  discrimina- 
tion exists,  that  it  is  after  all  an  extremely  exceptional  case,  and  that 
the  laws  w^hich  Congress  enacts  and  the  bill  which  this  committee 
reports  ought  to  be  designed  to  regulate  the  normal  marine  trans- 
portation. 

Now  reference  has  been  made  to  the  fact  that  all  the  steamships 
plying  between  San  Francisco  and  Seattle  charge  the  same  rates. 
I  do  not  know  whether  they  do  charge  exactly  the  same  passenger 
and  freight  rates  or  not,  but  if  they  do,  it  is  only  what  anyone  would 
suppose  they  w^ould  do,  and  because  they  do  that,  it  does  not  neces- 
sarily follow  that  any  combination  exists  between  those  two  steam- 
ship com])anies.  The  transcontinental  carriers  all  have  the  same 
rates,  but  that  does  not  mean  there  is  any  combination  between  them 
which  fixes  those  rates,  but  it  means  that  the  line  which  has  the  long 
haul  has  to  meet  the  line  which  has  the  short  haul,  and  because  the 
steamship  rates  are  the  same  means  that  they  are  so  not  by  agree- 
ment between  them,  but  by  the  force  which  each  steamship  exerts 
upon  the  other. 

Mr.  Hardy.  Will  you  permit  me  to  say  that  the  evidence  .before 
us  w^as  that  they  had  conferences  and  agreements  covering  all  those 
things? 

Mr.  Wettrick.  There  are  undoubtedly  conferences  and  agree- 
ments. 

Mr.  Hardy.  They  might  do  that  without  conferences  and  agree- 
ments, but  the  evidence  was  that  they  had  the  agreements. 

Mr.  Wettrick.  I  want  to  say  further  on  that  point  that  between 
Seattle  and  San  Francisco  we  have  what  we  have  across  the  Conti- 
nent and  what  we  have  everywhere  where  there  is  interstate  water 
transportation  in  this  country,  namely,  the  competition  of  the  car- 
riers, and  the  steamships  plying  between  Seattle  and  San  Francisco 
are  held  by  the  rail  carriers  and  their  rates  to  water  rates  which  are 
reasonable,  and  which  are  usually  lower  than  the  rail  rates,  and 
which  they  have  to  make  if  they  want  to  attract  any  of  the  passenger 
and  freight  business  between  those  cities.  Likewise  the  water  rates 
through  the  canal  fixed  by  lines  that  continually  operate  arc  con- 
trolled and  determined,  you  might  say,  by  the  transcontinental  rail 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  191 

carriers.  Now  the  mere  fact  that  they  make  the  same  rates  does  not 
mean  they  are  in  a  combination  with  each  other.  When  the  Panama 
Canal  was  opened  the  steamship  lines  plying  between  the  two  oceans 
reduced  their  rates  to  a  point  lower  than  almost  anyone,  I  think, 
expected  the  rates  would  ever  go.  There  was  not  any  evidence  there 
of  a  combination  between  them  to  keep  rates  up,  and  when  they  go 
back  into  that  service  again,  as  they  undoubtedly  will  now  that  the 
canal  is  about  to  be  opened,  when  the  ships  are  available,  their  rates 
are  by  force  of  the  rail  competition  kept  at  a  figure  about  which  no 
one  will  complain  or  can  complain,  and  that  ought  to  be  taken  into 
consideration. 

Now,  as  I  said  before,  in  Seattle  we  are  building  our  public  docks 
and  warehouses.  We  desire  to  attract  all  the  steamship  transporta- 
tion we  can.  Our  lumber  people  out  there  at  the  present  time  are 
building  steamships.  According  to  the  newspapers  there  are  four 
or  five  new  shipbuilding  concerns  who  have  just  recently  started  out 
in  Seattle  or  are  about  to  start.  They  are  building  lumber  carriers 
for  the  lumber  mills  there,  schooners  and  other  ships.  They  have  to 
do  that  at  the  present  time,  because  steamship  transportation  is  not 
otherwise  available,  and  I  take  it  that  the  view  here  is  that  the 
schooner  or  the  tramp  ship  owned  by  a  lumber  company  engaging  in 
traffic  for  that  particular  company  is  not  subject  to  the  provisions  of 
this  act. 

Mr.  Hardy.  No. 

Mr.  Wettrick.  But  such  a  ship  will  go  through  the  canal  to  New 
York  City  and  unload  its  cargo  of  lumber  there,  and  instead  of  com- 
ing back  empty  it  will  ask  for  other  freight,  a  cargo  of  groceries,  or 
anything  else. 

Mr.  Hardy.  It  will  hold  itself  out  for  common  hire? 

Mr.  Wettrick.  Yes;  that  is  the  point  I  wish  to  make.  The  mo- 
ment it  does  that,  even  though  its  business  is  that  of  carrying  on  the 
trade  of  the  company  which  owns  it,  it  has  to  file  tariffs  with  the 
commission  and  it  becomes  subject  to  its  regulations  just  exactly  as 
any  other  regular  line. 

And  has  this  question  been  considered?  We  prohibit  the  railroads 
from  owning  coal  mines 

Mr.  Hardf  (interposing).  It  was  a  long  time  before  we  thought 
about  that,  was  it  not?  The  railroads  had  to  get  a  powerful  grasp 
and  control  before  we  thought  about  prohibiting  them  from  owning 
such  things,  and  I  do  not  know  whether  we  have  now  prevented  it 
or  not. 

Mr.  Mann.  That  is  a  very  serious  question  with  the  shipping  peo- 
ple just  now. 

Mr.  Hardy.  At  any  rate,  you  do  not  complain  because  we  do  not 
go  that  far  ? 

Mr.  Mann.  No;  I  would  not  want  to  see  you  go  that  far. 

The  Chairman.  I  spent  a  month  in  Portland  last  June  and  came 
in  contact  with  large  lumber  interests,  and  one  complaint  was  that 
the  owners  of  vessels  on  the  coast  would  come  in  and  say,  "  We  will 
buy  your  lumber  but  we  will  not  furnish  you  a  ship."  The  owner 
of  the  vessel  Avould,  of  course,  make  his  profit  on  the  transportation 
and  also  on  the  lumber.  I  told  those  people  out  there  to  go  to  work 
and  build  their  ow^n  ships.  They  have  large  interests  and  they  have 
good  timber,  and  I  told  them  to  build  their  own  ships  and  install  the 


192  REGULATOEi'    FEATURES    OF    SHIPPING    BILL. 

Diesel  type  of  engine  and  transport  tlieir  oAvn  commodity,  like  the 
Standard  Oil  Co.  and  the  United  States  Steel  Corporation,  and  be 
relieved  of  that — I  "will  not  call  it  an  imposition,  but  that  difficulty 
in  the  way  of  developing  their  trade.  I  thought  my  advice  was 
sound,  and  the}'  have  been  acting  on  it,  at  least  the}'  are  taking  steps 
along  that  line,  and  I  think  that  is  the  way  for  them  to  relieve  them- 
selves. The  Standard  Oil  Co.  builds  its  own  ships.  She  does  not 
carry  all  her  oil  in  the  foreign  trade,  but  she  supplies  her  tonnage  and 
she  regulates  the  rate.  too.  and  so  does  the  T'^^nited  States  Steel  Cor- 
poration, and  it  would  not  have  been  possible  for  those  companies 
to  have  extended  their  foreign  commerce  the  way  they  have  if  they 
had  been  willing  to  yield  to  the  exactions  of  the  Shipping  Trust. 

Mr.  Mann.  The  same  tiling  is  true  of  the  I'nion  Oil  Co.  and  of 
the  Associated  Oil  Co. 

Mr.  Hardy.  The  only  trouble  with  Judge  Alexander's  advice,  so 
far  as  its  applicability  to  ordinary  commerce  is  concerned,  is  that 
when  3^ou  charter  a  ship  to  carry  your  own  goods,  you  will  find,  when 
jou  tr}^  to  get  a  return  cargo,  that  the  fighting  ship  is  there  to  make 
you  lose  money  instead  of  making  money. 

Mr.  Wettrick.  That  has  not  happened  in  the  coastwise  trade. 

Mr.  Hardy.  It  did  happen  between  New  York  and  Galveston. 

Mr.  Wettrick.  Is  not  that  a  very  exceptional  instance  of  some- 
thing that  did  happen  ? 

Mr.  Hardy.  It  was  not  an  exceptional  instance,  but  it  was  the  com- 
mon condition  of  our  shipping  along  the  Gulf  coast.  The  chamber 
of  commerce  of  an  ordinary  little  town  could  not  afford  to  charter  a 
vessel,  because  they  knew  that  a  fighting  vessel  would  run  it  to  earth. 

Mr.  ^Yettrick.  While  talking  of  fighting  ships  may  I  express  this 
further  thought?  It  has  been  stated  by  the  chairman  and  other 
memljers  of  the  committee  that  the  effort  here  was  to  give  authority 
to  fix  a  maxinnim  rate,  and  then  you  say  that  the  carrier  can  make 
as  low  a  rate  as  it  pleases,  limited  by  the  fact  that  it  can  not  dis- 
criminate in  its  rates  and  do  things  of  that  kind.  Now,  then,  is  a 
ship  which  is  regularly  engaged  in  business,  but  which  for  some  pur- 
pose or  other  temporarily  makes  a  low  rate,  a  fighting  ship.  Does 
that  make  it  a  fighting  ship? 

Mr.  Hardy.  No. 

Mr.  Wettrick.  Why  could  not  that  ship  be  used  in  exactly  the 
same  manner  as  a  fighting  ship  is  used,  namely,  to  drive  competi- 
tors out  of  business? 

Mr.  Hardy.  Whenever  it  is  used  for  that  purpose,  the  owner  of  it 
can  be  subjected  to  a  fine. 

Mr.  Wettrick.  In  other  words,  if  you  are  going  to  enact  such  a 
law  as  this  at  all,  why  should  not  the  law  provide  that  the  board  shall 
have  power  to  establish  rates  which  are  just,  reasonable,  and  suffi- 
cient ? 

Mr.  Hardy.  Well,  we  thought  you  would  object  to  that.  You  are 
even  objecting  to  the  meager  i^owers  that  we  have  given  this  board. 

Mr.  Wet'I'utck.  I  do  not  want  you  to  go  further  at  all. 

Mr.  Hardy.  AYe  thought  we  were  doing  as  little  as  we  could  do, 
considering  the  distressful  situation  we  were  trying  to  meet,  and  we 
are  doing  so  little  that  I  am  ashamed  of  it  myself. 

Mr.  Wettrick.  What  I  meant  was  that  you  ought  not  to  go  to 
that  extent.    I  had  in  mind  to  point  out  Avhat  it  is  going  to  lead  to. 


REGULATORY    FEATURES    OF    SHIPPIXG    BILL.  193 

Mr.  Hardy.  The  commercial  and  shipping  interests  of  tlie  United 
States  would  become  better  educated  or  informed  by  this  board, 
AYhich  ought  to  be  composed  of  enlightened  men.  whose  conclusions 
should  be  for  the  benefit  of  the  common  interest  and  general  welfare 
of  the  country.  Among  other  things,  it  is  expected  that  this  body 
will  be  clothed  with  power  to  investigate  conditions,  legislation,  and 
everything  else  affecting  the  shipping  interests  of  the  T'nited  States. 
We  hope  that  it  may  be  in  some  respects  like  the  shipping  board  or 
Board  of  Trade  of  England,  and  that  it  will  study  these  subjects  and 
help  us  to  find  a  solution  for  this  trou.blous  problem.  It  ought  to 
be  a  board  composed  of  patriots,  and  I  can  not  suppose  that  it  Avill 
be  anything  else,  and  they  will  somehow  try  to  enlighten  us. 

ISIr.  Wettrick.  I  want  to  call  your  attention  to  this  proposition, 
and  that  is  that  you  can  prevent  rebates  without  fixing  steamship 
rates,  if  you  desire  to  do  so. 

The  Chairman.  We  know  Ave  can  do  that.  Tell  us  S(;m^thing  tliat 
is  not  self-evident. 

Mr.  Wf:ttric'k.  The  reason  I  said  that  was  that  it  would  be  pos- 
sible to  eliminate  the  isolated  instances  Avhere.  in  the  (roinion  of  the 
committee,  injustice  is  done,  Avithout  going  to  the  extent  of  doing 
Avhat  Ave  are  opposing  here,  namely,  giving  to  this  board  the  power 
to  fix  these  Avater  rates,  and  we  are  opposing  it  because  Ave  believe 
that  it  Avoiild  ine vital  ily  result  to  the  detriment  of  our  Avater  trans- 
portation. 

Mr.  Hardy.  Do  you  think  that  the  California  law  that  Avas  re- 
ferred to  by  the  gentleman  awhile  ago  ought  to  be  repealed? 

Mr.  Wettrick.  We  have  a  similar  laAv  in  the  State  of  Washington. 

Mr.  Maxn.  I  think  that  laAv  should  be  repealed,  and  I  fought  it 
before  the  California  Legislature.  I  caused  them  to  Avithdraw  an 
amendment  that  Avould  have  given  them  jurisdiction  of  all  steamer 
lines.  Tt  noAV  ajiplies  to  only  the  regular  steamer  lines.  They  Avith- 
drcAv  that  amendment  upon  the  same  arguments  and  statements  that 
ha  AC  been  made  here. 

Mr.  Wettrick.  We  have  a  similar  laAV  in  the  vState  of  Washington, 
but  it  has  not  been  in  operation  long  enough  to  enable  us  to  knoAV 
what  its  affects  are.  We  liaA^e  already  experienced  considerable  dif- 
ficulty, however,  as  to  Avhether,  for  instance,  it  applies  to  fishing 
boats,  tugboats,  and  A'essels  of  that  kind. 

Mr.  TL\RDY.  Take  the  history  of  railroad-rate  regulation,  and  you 
will  see  that  it  Avas  20  years  before  they  got  doAvn  to  the  point  of 
knowing  Avhat  they  Avanted  to  do. 

Mr.  ]Manx.  The  regular  lines  on  the  Sacramento  RiA-er  complained 
bittei'ly  to  the  California  Railroad  Commission  of  the  competition 
of  the  unregulated  steam  launches  that  Avould  go  up  the  river  in  the 
rich  season,  during  the  months  of  June,  July,  and  August,  and  grab 
up  the  barley  shipments  and  A^egetable  shipments.  Avhich  came  in 
large  amounts.  They  Avould  bring  them  down  in  big  barges  at- 
tached to  the  steam  launches,  taking  the  shipments  away  from  the 
regular  steamer  lines.  The  regular  steamer  lines  complained  very 
bitterly  about  that  situation. 

JSIr.  Hardy.  In  my  State  we  haA-e  the  same  controversy  over  the 
jitneys. 

38534—16 13 


194  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

Mr.  Makk.  There  are  certain  things  tliat  legislation  can  not  help. 
The  Chaihman.  I  am  going  to  put  into  the  record  this  brief  in 
reference  to  the  legal  status  of  tramp  steamers. 
(The  brief  referred  to  is  as  follows:) 

LKGAI.    STATfS    OF     IIIAMI'    VKSSKI.S. 

In  the  cousi(ieralii)ii  of  le.uislatinn  foi-  tlio  rf.mih.tion  of  coniinoii  caiTiers  by 
water  it  becomes  important  to  know  wlietb.er  irnmi)  vessels  ever  possess  the 
status  of  common  carriers. 

It  may  be  stated  :'.s  an  itlmost  .ueneral  proposition  that  sucli  vessels  seldom 
or  never  can  be  considered  as  common  carriers.  Tramp  vessels  are  almost  uni- 
versally chartered  by  a  single  shipper,  even  though  in  some  instances  that 
shipper  may  lie  a  charter  broker  who  has  accumulated  the  shipments  of  a 
number  of  small  shippers.  It  has  become  well  established  by  a  long  line  of 
decisions  in  the  Federal  courts  that  when  a  charter  party  gives  the  cliarterer 
the  full  capacity  of  a  ship  the  owner  is  not  a  common  carrier  but  a  bailee  to 
transport  as  a  private  carrier  for  hire. 

The  earliest  case  upon  this  point  is  (Jrwcie  r.  Palmer  (S  Wheat.,  00r».  082 
(1823)),  in  which  tlie  court  said: 

"  The  carrier  may  hire  his  vehicle,  oi-  his  team,  or  his  servant,  for  the  pur- 
poses of  transportation ;  or  lie  may  undertake  to  employ  them  himself  in  the  act 
of  transporting  the  goods  of  another.  It  is  in  llie  latter  case  only  that  he 
assumes  the  liabilities,  and  acquires  the  rights  of  a  common  carrier.  So  the 
shipowner  who  let  his  ship  to  hire  to  ani>ther,  wliether  manned  and  efpiipped 
or  not,  enters  into  a  contract  totally  distinct  from  that  of  him  who  engages  to 
employ  her  himself  in  the  transportation  of  the  goods  of  another.  In  the  former 
case  he  parts  with  the  possession  to  another  and  that  other  l)ecomes  the  cai-rier  ; 
in  the  latter  he  retains  the  possession  of  the  ship,  although  the  hold  may  be  tiie 
property  of  the  charterer;  and  l)eing  subject  to  tlie  liabilities  lie  retains  the 
rights  incident  to  the  character  of  a  conunon  carrier." 

While  this  statement  of  the  court  in  this  case  is  perhaps  little  more  than 
dicta  the  same  principles  have  lieen  applied  in  a  nmnber  of  subsequent  ca.ses 
in  the  circuit  and  district  courts.  In  Lamb  r.  Pnrknian  (1  Sprague,  .34.3;  14 
Fed.  Cas.  No.  8020  (18.57))  it  was  definitely  held  that  where  a  ship  was  let  by 
charter  party  to  the  defendant  who  was  to  furnisli  a  full  cargo  the  owners 
having  no  right  to  take  goods  for  any  other  person  were  in  no  sense  connnon 
carriers,  but  only  bailees  to  transport  for  hire. 

This  decision  has  been  followed  in  I?ell  r.  Pidgeon  (5  Fed..  (^U.  6P>S).  the 
Dan  (40  Fed.,  692),  the  7V/  (1.54  Fed.,  :«3,  338),  and  the  Royal  Srriifrr  (1S7 
Fed.,  224.  22G). 

In  Sunnier  v.  Caswell  (20  Fed.,  240,  2.51  ),  the  question  was  discussed  at  some 
length.    The  court  said  : 

"The  charter  appears  to  have  conleinplated  carrying  the  goods  of  the 
freighters  only.  She  was  in  no  sense,  therefore,  a  general  ship,  but  only  a 
-ship  hired  foi-'  a  specific  voyage  to  carry  a  particular  cargo  for  the  charterers. 
Such  a  contract  does  not  seem  to  be  within  the  definition  of  a  common  cari-ier. 
In  the  case  of  The  Niagara  v.  Cordes  (21  How.,  7),  a  comnntn  carrier  is  defined 
as  '  one  who  undertakes  for  hire  to  transport  the  goods  of  those  who  may  choose 
to  employ  him  from  place  to  place.  He  is,  in  general,  bund  to  take  the  goods  of 
all  who  offer,  unless  his  comiilement  for  the  trip  is  full  or  the  goods  be  of  such 
kind  as  to  be  liable  to  extraordinary  danger  or  such  as  he  is  unaccuslomed  to 
convey.'  None  of  these  conditions  attach  to  a  contract  of  affreightment  in 
charter  parties  like  the  present.  In  Lamb  v.  Parkinan  (1  Sprague,  353),  it  is 
stated  by  Sprague,  .!.,  that  such  contracts  '  are  not  those  of  a  connnon  carrier, 
but  of  bailees  for  hire,  bound  to  the  use  of  ordinary  care  and  skill.'  And  such 
is  the  view  taken  in  Pars.  Shipp.  &  Adm.,  vol.  1,  pp.  245,  248.  The  most  re- 
cent discussion  of  the  subject  is  in  the  case  of  Nugent  v.  Smith  (1  C.  P.  Div.  19), 
in  which  a  liability  like  that  of  a  common  carrier  was  upheld  by  Brett,  .1.. 
but  was  subsequeiitlv  overruled  in  the  court  of  appeals  by  Cockburn,  C.  .T. 
(1  C.  P.  Div.  423  (187G).) 

While,  as  pointed  out  by  the  court,  the  decision  in  this  case  did  not  rest  upon 
this  distinction,  the  reasoning  of  the  court  in  this  case  has  been  cited  and 
followed  in  several  of  the  other  cases  cited  in  this  memorandum. 

In  the  Wildenfels  (161  Fed.,  864,  860),  the  court  said : 

"But,  irrespective  of  these  considerations,  we  are  of  the  oiMinon  that  the 
Rover  was  not  pro  hac  vice,  a  common  carrier.    It  is  true  that  her  owner  was  in 


REGULATORY    FEATURES    OF    SHIPPING   BILL.  195 

the  lighterage  business  and  was  in  the  habit  of  taking  goods  for  anyone  who 
wanted  lighterage  done.  She  had,  however,  no  regular  route,  did  not  carry 
between  well-known  terniina,  and,  on  the  occasion  in  question,  was  engaged  to 
carry,  and  had  on  board  only,  the  jute  of  the  libelant.  She  was  not  a  general 
ship,  but  was  employed  for  this  business  exclusively ;  no  one  else  had  a  right 
to  put  a  pound  of  freight  aboard  her.  She  became  a  private  carrier  and  liable 
only  as  a  bailee  for  hire.  Her  owner  was  under  no  legal  obligation  to  carry  this 
.iute :  he  could  have  refused  this  and  all  other  cargoes  had  he  seen  fit  to  do  so 
and  no  liability  would  have  attached  to  his  refusal." 

and  :!fter  citing  Sumner  t?.  Caswell,  Lamb  v.  Parkman,  and  the  Fri,  pointed  out 
that,  as  held  in  Fish  i?.  Chapman  (2  Ga.,  349,  353),  the  liability  to  an  action  for 
a  refusal  to  carry  is  the  safest  criterion  of  the  character  of  the  carrier. 

The  Chairman.  I  offer  the  following  clipping  from  the  New  York 
Journal  of  Commerce  of  March  17,  1916,  for  consideration  of  the 
question,  should  foreign-built  ships  admitted  to  American  registry 
under  the  provisions  of  H.  R.  10500  be  permitted  to  engage  in  the 
coastwise  trade  where  that  trade  is  not  being  adequately  serA-ed  by 
domestic  lines: 

LINES    STAY   OUT   OF   PANAMA    SEKVICE — ATTRACTIVE   OUTSIDE    CHARTER   RATES   BRING 

GOOD    PROFITS LUCKENBACH,    AMERICAN-HAWAIIAN,    AND    W.    R.    GRACE   TO    AWAIT 

MORE    NORMAL    CONDITIONS     AFTER    THE    CANAL    IS     REOPENED    BEFORE    RESUMING 

OPERATIONS    IN    COAST-TO-COAST    ROUTE PANAMA-PACIFIC    LINERS    "  KROONLAND  " 

AND   "  FINLAND  "    WILL  RETURN    AS   SOON  AS  DEFINITE  ASSURANCES   ARE  RECEIVED. 

So  long  as  their  tonnage  commands  handsome  rates  for  time  and  trip  charters 
in  outside  services,  the  American  steamship  lines  which  until  recently  operated 
fleets  of  vessels  regularly  between  the  Atlantic  and  Pacific  coasts  of  the  United 
States  via  the  Panama  Canal  will  not  return  to  the  Panama  trade  route.  This 
is  the  verdict  of  the  officials  of  the  American-Hawaiian,  Luckenbach,  and  the 
Atlantic  &  Pacific  Steamship  (W.  R.  Grace  &  Co.)  Cos.,  in  response  to  inquiries 
made  yesterday  concerning  their  respective  plans,  now  that  the  prospects  are 
good  tiiat  the  canal  will  be  reopened  to  large-sized  vessels  on  or  about  April  15. 

While  all  the  companies  have  not  finally  abandoned  their  plans  for  resuming 
operations  in  the  coast-to-coast  trade  via  the  Panama  Canal,  in  nearly  every  in- 
stance they  have  arranged  time  or  trip  charters  for  their  steamers  which  were 
formerly  used  in  that  trade  at  very  attractive  figures. 

In  view  of  the  belief  among  steamship  men  that  the  present  conditions  of 
shipping  in  all  parts  of  the  world  are  such  as  to  insure  handsome  returns  from 
chartering  operations  in  routes  other  than  that  via  the  Panama  Canal,  together 
with  the  freight  cargo  difficulties  arising  from  the  congestion  of  the  rail  lines 
leading  to  the  seaboard  points,  the  feeling  is  general  that  the  Panama  route 
may  well  be  abandoned  until  such  time  as  outside  shipping  routes  are  not  so 
attractive  and  conditions  generally  more  nearly  normal.  Thus,  the  Panama 
Canal  route  may  see  the  return  of  the  regular  lines  whj<-h  formerly  operated 
over  it  for  some  months  to  come  after  the  canal  is  actually  reopened,  or  possibly 
until  some  time  after  the  war  in  Europe  is  over. 

The  steamship  men  are  skeptical  as  to  the  announcement  that  the  Panama 
Canal,  which  has  been  closed  continuously  to  navigation  since  last  September, 
would  be  available  for  ships  of  30-foot  draft  by  the  middle  of  next  month. 
Before  they  will  even  consent  to  consider  plans  for  resuming  service  via  the 
waterway,  the  companies  generally  want  more  definite  assurances  than  ai'e 
given  in  the  telegrams  received  from  Col.  Harding,  acting  governor  in  charge 
of  the  Canal  Zone. 

Shipping  men  say  that  they  will  not  believe  that  the  canal  is  available  until 
steamers  have  actually  passed  through  continuously  for  some  time.  They  have 
previously  declared  that  their  decision  to  suspend  operations  on  the  Panama 
route,  announced  only  a  month  or  so  ago,  after  many  months  of  waiting,  was 
only  made  after  considerable  thought  had  been  given  to  the  subject,  and  the 
abnormal  conditions  prevailing  in  the  outside  routes  on  the  Atlantic  had  brought 
them  assurances  of  better  terms  and  more  handsome  profits,  with  less  difficulty 
than  that  involved  in  the  Panama  orierations. 

Having  arrived  at  the  decision  to  suspend  the  Panama  business  and  satisfac- 
torily made  contracts  for  the  outside  use  of  their  steamers  at  record  rates  of 
profit  to  themselves,  they  see  no  reason  for  immediate  plans  looking  toward  a 


196  REGULATORY    FEATURES    OF    SHIPPING    BILL. 

resumption  of  tlie  I'unama  services,  with  domestic  freight  along  the  seaboard 
so  badly  congested  as  to  mean  delavs  to  their  shijis  for  periods  of  as  long  as 
30  and  40  days. 

No  fear  is  entertained  that  other  companies  may  undertake  to  operate  fleets 
in  the  Panama  route  for  some  time  after  the  canal  is  reopened  and  thus  afford 
strong  competition  to  them  when  they  do  decide  to  return  to  the  business.  This 
is  held  to  be  highly  improbal)le  in  view  of  the  much  higher  rates  and  profits 
wliich  are  obtainal)Ie  by  all  owners  in  the  other  services,  a  condition  which,  it 
is  believed,  will  continue  t(j  prevail  for  some  time  after  the  canal  is  reopened. 

The  first  of  the  old  established  lines  which  may  return  to  the  Panama  Canal 
trade  is  the  Panama-Pacific  Line,  with  the  steamers  Fiitltntd  and  Kroonliind, 
both  of  ^^•hich  vessels  have  lately  been  plying  in  the  American  Line  service 
between  New  York  and  Liverpool.  These  vessels,  however,  are  mainly  passen- 
ger steamers.  At  tlie  offices  of  the  company  it  was  said  yesterday  that  they 
would  be  returned  to  the  service  between  New  York  and  San  Francisco  via  tlie 
Panama  Canal  as  soon  as  assurances  had  l)een  received  that  the  resumed  canal 
service  would  not  be  interrupted.  Last  year,  before  the  ships  left  the  Panama 
route,  they  carried  0,000  passengers  in  less  than  six  months,  and  the  demand 
for  this  service  is  expected  to  be  strong  during  the  sununer  months. 

At  the  offices  of  the  Luckenbach  Steamship  Co.  it  was  said  that  the  company 
would  not  change  its  plans  for  tlie  continuous  cliarter  operation  of  its  vessels, 
mostly  in  the  South  American  trade.  No  plans  v;ere  being  made  to  return  to 
tlie  Panama  ti-ade  for  the  immediate  future  at  least,  and  it  was  unlikely  that 
the  line  would  resume  business  over  that  route  so  long  as  it  could  obtain  the 
high  rates  for  charters  which  it  has  done  since  suspending  Panama  operations. 
The  line  will  continue  its  vessel  charter  arrangements  until  shipping  conditions 
become  more  normal  and  tlie  present  high  rates  are  no  longer  obtainable, 
although  the  company  has  by  no  means  decided  to  abandon  the  Panama  trade 
for  all  time. 

At  the  American-Hawaiian  Line  it  was  stated  that  all  the  company's  ships 
had  been  chartered  for  other  routes,  ranging  from  the  South  American  trade  to 
European  freight  carrying.  Resumption  of  service  through  the  canal  would  be 
delayed,  an  official  said,  by  a  natural  distrust  of  announcements  that  the 
Panama  Canal  was  to  be  opened,  and,  furthermore,  the  docks  at  New  York  were 
so  jammed  with  freight  that  loading  took  too  long  to  be  profitable. 

(The  following  statement  was  submitted  for  the  record  by  Ed- 
ward C.  Plummer,  of  Bath,  Me.:) 

Since  this  Inll  is  limited  in  its  scope  to  "  common  carriers  "  by  water,  it  is 
important  to  understand  what  other  carriers  by  wattn-  engage  in  freight  trans- 
portation and  their  methods  of  doing  business.  While  the  bulk  of  the  world'i* 
freight  on  the  ocean  is  carried  by  tramp  ships,  and  this  term  has  come  to  he 
accepted  largely  as  referring  to  steamers  which  have  no  regular  lines  ujion 
which  they  operate,  it  includes  sailing  vessels  also,  the  sailing  vessels  being 
by  far  the  larger  part  of  the  United  States  tramp  fleet. 

During  the  past  15  years  quite  a  ]*espectable  fleet  of  steam  "  tramps  "  in  the 
coasting  trade  of  the  Unite<l  States  have  appeared,  the  excessive  cost  of  opera- 
tion keeping  them,  as  a  rule,  out  of  the  foreign  trade  during  normal  times,  but 
most  of  these  steamers  have  been  built  for  a  special  line  of  trade,  largely  coal, 
and  are  not  genei-ally  "free  lances"  in  the  carrying  trade.  But  tliei-e  are 
under  the  United  States  flag  more  than  one  and  one-half  million  tons  of  sailing 
vessels  which  are  seeking  any  kind  of  a  cargo  to  be  found,  mostly  in  the 
coasting  ti'ade.  because  of  inability  to  match  the  low  cost  of  operation  of  com- 
peting vessels  under  the  foreign  flag  in  the  foreign  trade,  and  it  is  of  the 
character  of  these  vessels  and  of  (he  manner  in  which  tlu\v  are  operated  that 
this  statement  deals. 

Practically  all  the  million  and  a  half  tons  of  sail  vessels  referred  to  are  indi- 
vidually owned  and  independently  operated.  Prom  25  to  75  or  more  persons 
join  together  to  build,  though  .sometimes  to  buy,  a  sail  vessel.  One  of  these 
owners  is  chosen  the  agent,  or  "  ship's  husband,"  as  he  is  known  to  the  courts.  It 
is  his  business  to  secure  cargoes  for  her,  collect  the  freight  money,  keep  lier 
in  repairs,  pay  all  ex])enses,  and  tiien  divide  any  surplus  remaining  in  his  hands 
among  the  owners,  his  compensation  being  a  small  percentage  of  the  gross 
freight  money  agreed  upon  by  him  and  the  other  owners.  For  the  purposes 
of  more  successful  operation  and  to  secure  an  adequate  income,  this  agent  be- 
comes an  owner  in  several  vessels,  as  a  rule,  and  this  collection  of  vessels, 


EEGULATORY    FEATURES    OF    SHIPPING    BILL.  197 

majxinii-  I'loni  2  to  40.  becomes  known  as  his  fleet.  He  is  not,  however,  the 
onwer,  as  is  so  often  assumed ;  he  is  merelj'  the  agent. 

In  every  important  shipping  port  there  are  a  large  number  of  men  known 
as  ship  brokers.  As  a  rule  they  do  not  own  any  vessels,  but  their  business  is 
to  get  track  of  possible  cargoes  and  vessels  suitable  for  carrying  such  cargoes 
and  bring  about  an  agreement  of  terms,  so  that  the  vessel  in  question  will 
consent  to  carry  the  cargo  at  a  price  the  cargo  owiler  is  willing  to  pay.  When 
the  ship  broker  has  accomplished  this  he  gets  his  reward  in  the  shape  of  a 
commission  on  the  gross  freight,  from  2*  to  5  per  cent  commonly. 

The  agent,  or  "  ship's  husband,"  is  in  touch  with  these  brokers,  and  from  the 
bureau  of  American  shii)ping  tliese  brokers  know  exactly  what  sort  of  a  fleet 
each  agent  controls.  When,  therefore,  a  lot  of  coal,  for  example,  is  sold  to 
Boston  parties  from  Norfolk,  a  number  <iC  ship  brokers  quickly  get  in  touch  with 
the  purchaser,  learn  the  particuhu-s  of  the  transportation,  ask  what  the  owner 
is  willing  to  pay  and  learn  that  it  is  a  little  less  than  the  last  rate  paid  on 
that  kind  of  a  cargo  between  those  two  points.  These  ship  brokers  also  look 
over  the  lists  of  vessels  available,  or  soon  to  be  available,  for  the  voyage  con- 
templated and  ask  for  ves.sels  at  a  tigui-e  lower  than  the  maximum  which  the 
coal  owner  has  said  he  would  pay  if  ho  luul  to.  Then  it  is  a  case  of  several 
agents  competing  for  this  contract,  and  as  the  income  of  the  agent  depends  on 
his  getting  a  cargo  to  carry  at  some  price,  the  rates  during  a  time  of  few 
cargoes  are  cut  below  what  many  agents  would  consider  a  living  price.  On 
the  other  hand,  if  a  cargo  conies  on  the  market  wlien  most  vessels  are  other- 
wise engaged,  or  it  calls  for  a  trip  to  the  Gulf  in  the  liurricane  season,  rhen  the 
agents  insist  on  a  better  price,  and  tlie  rate  goes  up. 

In  effect,  therefore,  it  will  be  seen  that  bulk  cargoes  carried  by  these  tramp 
\essels  are  auctioned  off,  and  the  ship  making  the  lowest  bid  gets  the  business. 
As  sea  captains  in  these  vessel  are  always  looking  for  a  larger  ship,  because 
they  are  generally  paid  on  a  commission  l)asis,  the  ordinary  rate  being  $25  per 
month  and  a  per  cent  of  the  gross  freiglit  earned,  whenever  business  becomes 
prosperous  they  go  to  their  friends  and  induce  them  to  assist  in  building  such 
a  vessel  as  the  captain  desires ;  a  ship  agent  joins  in  the  work  in  order  to  in- 
crease his  fleet,  and  thus  a  full  supply  of  vessels  always  is  maintained.  For 
the  25  years  that  I  have  been  intimately  acquainted  with  the  shipping  business 
I  have  never  known  any  extended  period  when  the  ship  wasn't  htmting  for 
the  cargo  instead  of  the  cargo  hunting  for  the  ship,  until  now. 

It  will  be  noted  that  these  vessels  are  not  "  common  carriers,"  because  they 
do  not  offer  to  carry  the  freight  of  anybody  who  offers;  but  they  are  chartered 
as  a  whole  to  carry  a  specific  cargo  lietween  specified  ports  for  certain  parties 
at  a  specified  rate  mutually  agreed  upon.  They  are  not  permitted  to  carry 
passengers,  but  are  freight  carriers  pure  and  simple.  They  have  never  been 
in  any  combinations,  have  no  fixed  rates,  and  have  insured  bulk  cargoes  the 
lowest  possible  rates  through  the  desire  of  too  many  an  agent  to  do  some  busi- 
ness that  he  may  have  a  gross  freight  off  which  can  come  his  coiumission,  and 
the  other  owners  can  see  that  their  vessel  is  being  kept  in  motion,  whether  she 
is  making  profits  for  them  or  not. 

(Thereupon,  at  2.10  o'clock  p.  m.,  the  committee  adjourned.) 


